12/28/2023

Oil prices are stabilizing after drop

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Key points:

  • Oil prices stabilized on Thursday after falling sharply in the previous session as concerns about disruptions to shipping along the Red Sea route eased.
  • However, tensions in the Middle East continue to rise, which could lead to further increases in oil prices.
  • Qatar agreed to supply Shell to Singapore with up to 18 million barrels of oil per year for five years.

Oil prices regained some stability on Thursday, rebounding from a sharp decline in the previous session amid easing concerns over potential shipping disruptions along the Red Sea route. While tensions continued to simmer in the Middle East, the return of major shipping lines to the area provided some reassurance to market participants.

Brent crude futures edged up 2 cents to settle at $79.75 per barrel, while U.S. WTI crude futures edged down 3 cents to settle at $74.08 per barrel. The previous day, both benchmarks had fallen nearly 2% as shipping companies began resuming their activities in the Red Sea.

“Concerns about shipping in the Red Sea have eased, but ongoing concerns about tensions in the Middle East, especially Iran’s involvement in the region, are making further sales difficult,”

said Hiroyuki Kikukawa, president of NS Trading, a division of Nissan.

The lingering possibility of a protracted Israeli military operation in Gaza and the escalation of the conflict into attacks on ships in the Red Sea continue to weigh heavily on market sentiment.

The release of U.S. government data on fuel inventories is scheduled for Thursday, albeit one day later than usual due to the Christmas holiday on Monday.

On Wednesday, data from the industry group the American Petroleum Institute (API) revealed that crude oil inventories rose by 1.84 million barrels in the week ending December 22, contrary to analysts’ expectations of a decline of 2.7 million barrels.

Qatar to supply Shell crude oil under five-year deal

 

Adding to the recent flurry of energy deals, Qatar has secured a five-year agreement with Shell to provide up to 18 million barrels of crude oil per year to the multinational energy company’s operations in Singapore.

QatarEnergy, the state-owned energy company of Qatar, announced the deal on Thursday, describing it as the first-ever five-year crude oil agreement in the country’s history. The agreement is expected to commence in January 2024 and will provide Shell with a significant quantity of crude oil for its global operations.

“We are pleased to sign our first five-year crude oil sales agreement. This agreement further strengthens QatarEnergy’s relationship with Shell.”

QatarEnergy CEO Saad Sherida Al Kaabi said in a statement.

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