EBC Global Focus | Oil climbs amid Europe and Middle East gloom

On Monday (January 29th), a missile struck a tanker owned by Tok Corp in the Red Sea, causing oil prices to rise by 1%. Additionally, Russia's refined oil exports may face challenges due to drone attacks.

The two major crude oil contracts saw gains for two consecutive weeks last week, closing at a near two-month high. The resilience of the US economy and additional stimulus measures from China have strengthened demand expectations.

There is a divergence between the International Energy Agency (IEA) and OPEC regarding this year's crude oil demand outlook, reflecting differing expectations on the global transition away from fossil fuels. The IEA represents industrialized nations, while OPEC consists of oil-producing countries.

OPEC believes that crude oil usage will continue to rise over the next 20 years, whereas the IEA anticipates a peak by 2030. Last year's record-high global carbon emissions have led to doubts about the pace of the energy transition.

After exceeding production expectations in 2023, activity in the US shale oil regions is slowing due to a decline in the inventory of prime drilling locations. The total expenditure for North American production is expected to decrease by 1% this year, following a 13% increase last year.

Reuters reported that China has called on Iran to mediate Yemen's disruptive actions in the Red Sea shipping lanes. This key trade route linking Europe and Asia is frequently used by the world's largest exporter of goods.

Brent crude oil has broken through the 200-day moving average, with the next target set at $85. Meanwhile, $81 is a crucial level to maintain the upward trend.

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