Oil prices rose slightly this week, but there isn't much OPEC+ can do to push oil prices higher.
The Zhitong Finance App learned that John Kilduff, a partner at New York energy hedge fund Again Capital, said on Tuesday that oil prices have risen slightly this week, but there isn't much OPEC+ can do to push up oil prices. This is because the US has been mass-producing oil, and both production and crude oil exports have reached record highs. “OPEC+ production cuts are not strong enough to keep oil prices far above current levels,” Kilduff said.
As tension in the Red Sea intensifies, oil prices are also rising. On Tuesday, the international benchmark Brent crude futures rose 2.5% to $81.07 a barrel. WTI crude oil futures rose 2.7% to close at $75.57 a barrel.
However, the price of WTI crude oil is still far below the September high of $94 per barrel. Meanwhile, US oil production has reached record levels, and the market is oversupplied — contrary to OPEC's move to boost oil prices by cutting production.
From a broader perspective, Kilduff believes that in the face of the global economic slowdown, demand in the oil market will drop sharply next year.
“There are unfavorable factors in the economic outlook,” he said. Central banks around the world cut interest rates not only because the inflation situation may be under control, but also because the economic outlook is weakening, which will directly affect crude oil demand and energy demand next year.”
As key economic data such as inflation suggests that the economy is showing signs of cooling, the Federal Reserve is also considering cutting interest rates next year. But cutting interest rates may not be entirely a positive sign; it is more like a double-edged sword. Kilduff believes this could curb demand for oil.
Meanwhile, the turmoil in the Middle East appears to be less of a threat to oil, Kilduff added. He pointed out that recent Houthi attacks on key routes won't be a big problem, and there hasn't been much change in the market after other political events, such as the Houthi missile attack in 2019, or the 2020 US drone attack that assassinated Iranian Major General Qasem Soleimani.