Crude oil prices hover below $80/bbl amid Angola’s OPEC-exit decision, higher crude output

US crude output rose to a record 13.3 million barrels per day (bpd) last week

Crude oil prices trade below $80 per barrel amid Angola’s decision to exit from Organization of the Petroleum Exporting Countries (OPEC) and increase in US oil output.

Brent crude settled at $78.33 per barrel on December 22 while US West Texas Intermediate (WTI) crude futures fell to $73.89 a barrel.

“Brent is currently trading at US$79 per barrel, and there are indications that it might exhibit a range-bound pattern in the near future with a downward inclination,” said Emkay in a report.

The decline in oil prices come after recent spike in prices amid attacks by the Yemen's Houthi rebels in the Red Sea. The waterway includes the Suez Canal, an arterial East-West trading route, which accounts for 10 percent of the world's oil, grain, and consumer goods shipments.

According to IFA Global, several ships were getting diverted away from the Red Sea, and are taking a 10-14 day longer route around Africa to reach Asia- pushing crude prices higher.

However, crude was again under pressure after stir in OPEC and reports of increase in US oil output. US crude output rose to a record 13.3 million barrels per day (bpd) last week, compared to the previous all-time high of 13.2 million bpd.

Brokerage Emkay said, “Upon closer examination, it appears that the immediate and short-term dynamics may be influenced by demand destruction, whereas the sustained, long-term growth in demand is expected to stem from the economic engines of India and China.”

Demand is expected to increase in 2024 with economies expected to perform better in the coming year. OPEC expects world oil demand to grow to 2.2 million bpd in 2024 for an average of 104.4 million bpd. The oil cartel said in a report that oil demand is expected to be supported by resilient global GDP growth, amid continued improvements in economic activity in China.

In a supply-strained market, higher demand would support crude prices. In December, OPEC and their allies (OPEC+) voluntarily agreed on a fresh production cut of nearly 1 million bpd by early 2024, taking the total reduction above 2.2 million bpd or about 2 percent of the world supply. The decision is aimed at supporting crude prices.