First and foremost, it is necessary to acknowledge that the political challenges in Libya are significant. The closure of its main oil field, capable of producing 300,000 barrels of oil per day, increased the risk of less availability of crude oil. Furthermore, escalating tensions in the Red Sea, stemming from the conflict between Israel and Hamas, heighten the possibility of disruptions in oil supply.
However, these events bring more volatility than confirmation for a bullish market. There is an increasing amount of oil being produced, which reduces the current market deficit and offsets the risks mentioned above. Russia exported around 3.78 million bpd in the last week of 2023, a level not seen since July. Venezuela, a country previously sanctioned by the West, increased its exports by 12% in 2023 to approximately 700,000 barrels per day.
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While production is increasing globally, there is still considerable uncertainty about energy demand in the world's major economies, typically resulting in more bearish sentiment over the market. For example, last week there was an increase of over 10 million barrels in gasoline and heating oil inventories in the United States, indicating that refineries may require less crude oil in the upcoming weeks.
That said, it is important to recognize that 2024 may be better. The prospect of interest rate cuts in March of this year should boost energy commodities. Since the energy complex generally reflects macroeconomic trends, a less restrictive monetary cycle will be a supportive factor for prices. Furthermore, the WTI's historical performance has shown strong resistance at $70, so there is no evidence to suggest that oil will fall to much lower levels than the current ones.
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