Oil prices will drop by 10% in 2023. The reasons

The price of oil is about to have a complicated 2023, with prices plummeting by around 10% during the past 12 months.
And 2024 promises to be treacherous, between the uncertainties about OPEC production cuts and the unpredictable war scenario in the Middle East (with the concrete threat of a Red Sea in conflict and goods in chaos).
At the time of writing, Brent is trading just above 77 dollars a barrel and WTI futures are trading at 72 dollars a barrel, with a slight increase in both prices of 0.57% and 0.40% respectively.
On this last trading day of 2023, the spotlight is on the performance of black gold throughout the year.
And the balance sheet says that oil is headed for its biggest annual decline since 2020, as the Israel-Hamas war and OPEC+ production cuts have failed to raise prices.
Traders are concerned that global crude supplies may yet eclipse demand in the coming quarters, thus maintaining downward pressure on the price of crude oil.
read also Oil price, all the unknowns of 2024.
What to expect? Oil prices collapse in 2023.
What happened? Oil prices will end 2023 without momentum and recording their first annual decline in two years, after geopolitical concerns, production cuts and global measures to contain inflation triggered constant price swings.
Black gold ended the trading session in losses on Thursday, December 28, after official US data showed nationwide crude inventories reduced last week, but holdings in the major storage hub of Cushing, Oklahoma, widened for 11th week reaching the highest since August.
US crude oil production has been at record rates, boosting supply in a context where demand remains uncertain globally.
Crude oil is capping off a challenging year, with prices pushed higher by the outbreak of war between Israel and Hamas, as well as speculation that the Federal Reserve would finish raising interest rates as inflation eases.
However, despite repeated supply cuts by OPEC and its allies, increased production from countries outside the cartel, coupled with concerns about slowing demand growth, have combined to push crude oil futures lower.
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In the latest round of cuts, OPEC+ members, including Russia, the United Arab Emirates, Kuwait and Iraq, have promised further cuts that will take effect on January 1.
Furthermore, Saudi Arabia will continue to cut production by 1 million barrels per day and this policy could be prolonged.
read also Why Russia is rejoicing in oil sales in 2023 and gas in 2024 Meanwhile in December, tensions suddenly increased in the Red Sea after attacks on ships by Houthi rebels in Yemen.
Half of the world's container ship fleet that regularly transits the waterway is now avoiding the route, and crude tankers have also been diverted, lengthening journeys and driving up costs.
“The prolonged conflict in Gaza keeps geopolitical tensions high,” said Yeap Jun Rong, market strategist at IG Asia Pte.
However, a broad Santa Claus rally in stocks and “the US dollar struggling to gain ground lately, are helping to provide some supportive catalysts for oil towards the end of the year.” In summary, all the uncertainties about the oil price at the end of 2023 will also spill over into 2024, when the factors of war, OPEC, central banks and recessions – with uncertain forecasts – will still be decisive for crude oil.