By Ahmad Assiri

Despite recent US strikes against the Houthi group aimed at disrupting navigation in the strategic Bab al-Mandab strait, the actual influence on oil prices proved to be fleeting and marginal. Prices momentarily spiked to $72 per barrel, yet swiftly reverted to a steadier state around the $71 mark. This quick stabilization demonstrates the minimal geopolitical effects in the Red Sea on the broader oil market.

Crude oil prices have hovered above the $71 per barrel threshold, experiencing only a modest dip following downturns triggered by escalating concerns over a slowdown in global economic growth. This downturn is attributed to anticipations of reduced economic activity which, in turn, dampened investor enthusiasm, particularly around consumer spending.

Fundamentally oil market is contending with dual challenges. The primary pressure stems from a slowdown in demand linked to the deceleration in economic growth. On the supply side, OPEC+ is on track to incrementally increase its production by 138,000 barrels per day starting next month – a strategic decision initially slated for December but postponed to early April. This methodical approach in adjusting supply levels is indicative of the delicate balance OPEC+ aims to maintain amid fluctuating market dynamics.

Assiri  is Research Strategist at Pepperstone