Oil prices saw a 1% increase on Friday due to ongoing tensions in the Middle East stemming from Houthi attacks on ships in the Red Sea.
However, concerns about the effectiveness of OPEC in maintaining price support arose with Angola’s decision to exit the organization.
Brent crude futures showed a rise of 71 cents, or 0.89%, reaching $80.10 a barrel before the earlier Friday closing time at 1230 GMT, just ahead of the Christmas holiday weekend.
Brent and WTI futures were poised for a nearly 5% week-on-week increase, driven by escalating geopolitical tensions resulting from the Red Sea attacks and the associated risks to shipping operations.
Backstory
- Increasingly, maritime carriers are steering clear of the Red Sea in response to attacks by the Houthi militant group, claiming to retaliate against Israel’s actions in Gaza. These attacks have led to disruptions in global trade through the Suez Canal, a critical conduit handling approximately 12% of international trade.
- On Tuesday, the United States launched a multinational operation aimed at protecting commerce in the Red Sea. Despite this, the Houthis asserted their intention to persist in carrying out attacks.
- Yesterday, Angola announced plans to exit OPEC after the group cut its production quota for 2024. The country’s energy Minister said, “We feel that … Angola currently gains nothing by remaining in the organisation and, in defence of its interests, decided to leave,”
- The African nation, responsible for approximately 1.1 million barrels per day of oil production, stated that its membership in the oil cartel no longer aligned with its interests. This decision came after Angola expressed dissatisfaction with the broader OPEC+ group’s resolution to decrease its output quota for 2024 in a bid to prop up prices.
- While Angola is a small fry in the international oil market, its exit poses a concern for the future of OPEC which has seen Ecuador and Qatar exit in the last decade.