Proactive Investors - Demand for oil is still likely to grow heading into the new year as tensions in the Middle East leave the market on the edge of its seat.
Updates by the International Energy Agency (IEA) and the Organization of the Petroleum Exporting Countries (OPEC) respectively on Thursday pointed to the vulnerable state of the market as future demand now looks sure to grow.
According to OPEC, demand will increase by 2.25 million barrels per day in 2024 on “solid economic growth” and “continued improvements in China”.
The IEA pointed to the outbreak of war between Isreal and Palistine’s Hamas over the weekend as causing potential threats to supply meanwhile, as uncertainty remains.
“A sharp escalation in geopolitical risk in the Middle East, a region accounting for more than one-third of the world’s seaborne oil trade, has markets on edge,” the agency said.
Analysts have pointed to a potential escalation of the war into neighbouring countries as the main threat to future prices.
“Thus far, the market is trading well in the aftermath of the conflict in Israel-Palestine,” Citigroup (NYSE:C) analysts said on Thursday.
However, any involvement of Iran remains the main point of concern, the bank pointed out, with current price rises in line with trends seen during historical - but albeit contained - conflict in the area.
“The Middle East conflict is fraught with uncertainty and events are fast developing,” the IEA added though.
“Against a backdrop of tightly balanced oil markets anticipated by the IEA for some time, the international community will remain laser-focused on risks to the region’s oil flows.”
Prices rose on Thursday following the updates, with Brent Crude jumping 2% to US$87.27 per barrel and West Texas Intermediate climbing 1.5% to US$84.55.