Global oil markets witnessed a noticeable uptick in prices this Friday, driven by escalating geopolitical tensions in two major producing nations. The dual triggers were increased United States economic pressure on Venezuelan oil shipments and coordinated military airstrikes against militant groups in Nigeria.
Geopolitical Tensions Fuel Price Increase
By early trading hours at 0114 GMT, Brent crude futures had risen by 24 cents, or 0.4%, reaching $62.48 per barrel. Mirroring this movement, the US benchmark, West Texas Intermediate (WTI) crude, also climbed by 23 cents, a similar 0.4% gain, to settle at $58.58. This upward movement is directly linked to fresh risks to global supply chains.
The White House has directed a strategic focus on a "quarantine" of Venezuelan oil exports for at least the next two months. This move signals Washington's current preference for leveraging economic tools over military action to exert pressure on the government in Caracas. Simultaneously, at the formal request of the Nigerian government, US forces conducted airstrikes targeting Islamic State militants in the northwest region of the country. While Nigeria's primary oilfields are located in the south, this military action introduces new uncertainty and geopolitical risk premium into the market.
Annual Decline Contrasts with Short-Term Gains
Despite this recent climb, the broader narrative for 2024 remains one of significant annual decline. Investors are balancing concerns over supply disruptions against the backdrop of US economic growth indicators and expectations of a supply surplus. Both Brent and WTI are on track for their steepest yearly drops since the 2020 pandemic, which devastated global fuel demand.
Current projections indicate Brent is set to fall by approximately 16% this year, with WTI facing an even steeper decline of around 18%. This trend is primarily fueled by analysts' consensus that supply will likely outpace demand in the coming year. Additional pressure has come from disruptions elsewhere, such as the reported drop in oil shipments from Kazakhstan via the Caspian Pipeline Consortium (CPC). Following a Ukrainian drone attack that damaged facilities at a key export terminal, December shipments are expected to fall by a third, hitting their lowest level since October 2024.
Market Awaits Key US Inventory Data
Traders and analysts are now looking ahead to crucial data that will shed light on demand strength in the world's largest oil consumer. The US Energy Information Administration (EIA) is scheduled to release its official inventory data on Monday, a delay caused by the Christmas holiday. This report will provide a clearer picture of consumption trends in the United States and will be a key driver for price direction in the final week of the year.
In summary, while immediate geopolitical events in Venezuela and Nigeria provided a boost to crude oil prices, the overarching market sentiment remains cautious. The industry is grappling with the prospect of ample supply in 2025, even as it navigates unpredictable regional conflicts and strategic economic maneuvers by major powers like the United States.
