US Inventory Dip Hints at Further Crude Oil Price Climb in forthcoming weeks

The Crude oil market witnesses a clear rebound from H2 of January 2024 after witnessing immense fluctuations as the Crude oil prices have been on a steady upward climb for straight two weeks of January 2024, propelled by a potent cocktail of escalating geopolitical tensions and tightening supply amidst robust demand. This surge, exceedingly early-month expectations, as the expected dip in inventories could surge the prices even higher.

The Crude oil market has continued to remain at a higher end with WTI Crude oil closing at USD 72.99/barrel up by 1.5%; Brent Crude oil closed at USD 78.43/barrel up by 1.4% during the third week of January 2024. The immediate trigger for the price hike was the intensifying conflict in Yemen, where Houthi rebels, backed by Iran, launched attacks on commercial ships in the Red Sea. This strategic waterway, crucial for oil transportation, became a battleground, disrupting tanker movements and injecting uncertainty into the market. The subsequent US and UK airstrikes against Houthi targets further heightened tensions, underlining the fragility of the region and the potential for further disruptions. Beyond the immediate geopolitical flashpoint, a broader supply squeeze also played a role in pushing prices higher. The US Energy Information Administration (EIA) reported a lower-than-expected decrease in US Crude oil inventories, indicating potentially tighter supply conditions. This was further reinforced by a significant drop in net imports, suggesting a shift towards domestic supplies and potentially contributing to a more constrained market. Adding fuel to the fire was the continued strong demand for Crude oil. Despite the headwinds of the global economic slowdown, the appetite for oil remained robust, particularly from China, as its economy rebounded from lockdown measures. This robust demand, coupled with the tightening supply dynamics, created a perfect storm for higher prices.

The rising Crude oil prices are likely to have a ripple effect across various sectors. Consumers can expect higher gas prices at the pump, potentially impacting transportation costs and overall household budgets. Businesses, particularly those reliant on oil-based products and energy-intensive industries, may face increased production costs and potentially reduced profit margins.

As per ChemAnalyst, the future trajectory of Crude oil prices would likely remain bullish for forthcoming weeks as any escalation of conflict in Yemen could further disrupt oil flows and push prices higher. If supply remains tight and demand continues to hold strong, prices could remain elevated. Moreover, according to US Energy Information Administration statistics, US commercial Crude oil stocks likely decreased by 3 million barrels to 427 million barrels, according to analysts. This would be the lowest level since October 27, when Crude stocks were at 421.9 million barrels, further affecting the upcoming prices.