Middle East oil markets look set for further volatility in 2024, extending heightened volatility last year, the Dubai Mercantile Exchange (DME) said on Thursday, amid producer supply cuts, record U.S. output and the recent Red Sea tensions.

Supply and demand uncertainties will continue following the recent fighting in Gaza and in the Red Sea, which could threaten a broader conflict affecting larger parts of the Middle East, the DME said in a report.

However, “absent any wider escalation in events emanating from Israel and a major escalation in the Red Sea, oil demand is expected to continue to weaken in 2024 which could cap oil prices below the $80 per barrel level,” it said.

The DME lists the Oman crude oil futures contract, which is a physically settled contract serving as a Middle East benchmark used by the region’s national oil companies as part of their export pricing formulas.

The average price of the front-month DME Oman future is $77.63 a barrel so far in January, compared with $77.21 a barrel in December.

Volumes of crude oil delivered via the DME rose to a record of 21.8 million barrels per delivery month in 2023, up 22% from 2022, according to the bourse.

Spot month trading volumes reached over 800,000 contracts last year, just 4% under an all-time high set in 2018 when physical volumes were 24% higher, it said, driven up by strong demand for liquid risk management and speculative solutions.
Source: Reuters (Reporting by Muyu Xu; Editing by Christian Schmollinger)