As the end of December approaches, the Crude Oil market witnessed a clear rebound since the Yemeni armed forces attacked ships and crews in the Red Sea. For a while, the Crude Oil market admitted a continuous descent trend and the prices have been pummelled for eight straight weeks, their longest streak of losses since 2018. The fears of an excess supply of Crude Oil were mounted, with production continued strong despite OPEC+ production cuts. Moreover, key markets like China were showing signs of slowing oil consumption, further dampened Crude Oil prices previously. However, the downfall of the market reversed recently due to the attacks on ships in the Red Sea by Yemeni Houthi forces which have disrupted global shipping and threatened vital trade routes like the Suez Canal, pushing Crude Oil prices higher.

As the last week of December ended, the Crude Oil prices of both the benchmark assessed at USD 73.55 per barrel WTI and USD 78.97 per barrel Brent with a rise of 4.5% respectively, compared to the previous week. This uptick was attributed to the attacks on Red Sea vessels, raising concerns about shipping disruptions and potential supply chain hiccups. This disruption alone accounts for over 10% of global maritime trade, making it a significant factor in the price surge. Adding fuel to the fire, the escalating Israeli-Palestinian conflict in Gaza, spreading its aftereffects globally.

Moreover, economic forces are also contributing to the current price trend as the falling inflation suggested by economic data in the US has fueled market expectations for a Federal Reserve interest rate cut in March 2024. This potential decrease would stimulate the economy and boost demand for Crude Oil in the upcoming weeks. Furthermore, the continued weakening of the US dollar is adding upward pressure on Crude Oil prices. However, the recent internal disagreements between OPEC+ and other members cast doubt on the effectiveness of future production cuts. As per the reports, Angola, a major African oil exporter, threatened to ditch the club and go solo. This decision, driven by Angola's dependence on Crude Oil exports, casts a shadow of ambiguity over the group's production cut agreements. Meanwhile, a recent statement from Russia promising further export reductions offers market expectations for deeper cuts at the next OPEC+ meeting, adding another layer of complexity to the price equation.

As per ChemAnalyst, the highs in Crude Oil prices are expected to be foreseen in the upcoming weeks due ongoing to geopolitical tensions, particularly in the Red Sea and the Middle East, providing immediate upward pressure. Moreover, the expectations of easing inflation and a potential Fed rate cut could support the trend.