Oil edged lower as traders weigh surging US production against disruption in the OPEC cartel and the threat of ship attacks in the Red Sea.
West Texas Intermediate slipped to settle below $74 a barrel after a three-day advance, with sentiment worsening after Angola announced its exit from the Organization of Petroleum Exporting Countries.
Angola’s departure will shrink OPEC’s membership to 12 nations. The government in Luanda had rejected a reduced output limit that leaders of the group had imposed on it in a reflection of the country’s dwindling production capacity. Traders continue to see signs that supply remains ample as US crude output hit a record of 13.3 million barrels a day last week, according to government data.
Meanwhile, the Iran-backed Houthi militant group warned it would retaliate if the US carries out attacks on its bases in Yemen.
Crude rallied earlier this week as the escalation of the Red Sea attacks prompted shippers to divert vessels away from the major energy chokepoint. Oil is still set for the first annual decline since 2020, as booming production from the US, Guyana and Brazil offsets output cuts by Saudi Arabia and the OPEC+ cartel.
Red Sea
Almost 12% of global trade goes through the Red Sea, and more than 100 container ships are currently taking the long route around Africa due to the fear of attacks. While Washington is mulling military action against the Houthis, it would prefer a diplomatic solution, and is working with Western and Arab allies to bolster a maritime protection force.
“Until the naval coalition” eventually “shows its teeth, the Red Sea situation will continue to have an outsize influence on oil players’ thinking,” Tamas Varga, an analyst at broker PVM Oil Associates Ltd. – Bloomberg
