IEF – Comparative Analysis, Jan 2024

In the January 2024 Comparative Analysis report by IEF, it is highlighted that despite rising geopolitical risk in the Middle East, oil prices have remained range-bound. This is due to more shippers avoiding the Red Sea following attacks on transiting ships by Yemen-based Houthis. As a result, several oil companies have suspended shipments through the area and rerouted cargos around Africa's Cape of Good Hope, resulting in longer voyage times. In response to the attacks, a US-led coalition has launched strikes on Houthi targets in Yemen. Furthermore, Iran has carried out strikes in Iraq, Syria, and Pakistan, with Pakistan retaliating with a strike into Iran. However, despite these escalations, physical oil and gas production have not been impacted and Brent crude prices have remained range-bound in the upper-$70s. Economic headwinds and negative sentiment have contributed to keeping prices capped. The report also mentions the disruption in US production and refineries due to extreme cold and winter weather. North Dakota, the US' third-largest producing state, has seen a nearly 50% fall in oil production this week as a result of operational challenges caused by cold temperatures. Additionally, freezing weather in Texas has led to reduced operations at numerous refineries. Though US physical oil prices have seen some upward pressure, the outage is expected to be temporary, and the futures market remains largely unaffected. Another significant development highlighted in the report is Angola's decision to leave OPEC after 16 years of membership. Angola was the 7th largest OPEC member, producing approximately 1.1 million barrels per day (mb/d) of crude. This edition of the Comparative Analysis report now includes Angola in non-OPEC production figures and has adjusted the month-on-month revisions to account for its reclassification. The report also points out the divergence in data and estimates regarding global oil inventories, supply-demand balance, non-OPEC production estimates, and global demand levels among the IEA, OPEC, and EIA.