Heightened geopolitical tensions in the Middle East have contributed to a rise in oil prices (CL=F, BZ=F) in the first week of 2024.
Yahoo Finance's Ines Ferré analyzes what has been moving oil prices and comments on a Wall Street Journal report that Southwestern Energy (SWN) and Chesapeake Energy (CHK) could be nearing a $17 billion merger deal.
For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.
Editor's note: This article was written by Angel Smith
Video Transcript
[AUDIO LOGO]
JULIE HYMAN: Oil prices on the rise as volatility continues to take hold of the sector. Here with what's behind the latest price action what may be ahead for oil, let's get to Yahoo Finance's Ines Ferré. Hey, Ines.
INES FERRÉ: Hey, Julie. And oil finished the week in the green. You've got WTI and Brent crude that today were up more than 2%. Oil has had a kind of volatile week.
We saw prices that were lower yesterday. That was because of a disruption at a major oil field in Libya. There's been concerns also about the Red Sea and Houthi attacks in the Red Sea and Iran, which backs the Houthis and Iran sending a war vessel into the Red Sea.
The concerns among traders not so much about that war vessel, more about what will happen if there is a disruption in Iranian oil, which Iran produces almost 2 million barrels per day of oil. Look, as far as prices are concerned, mid-January, you do see prices that are more sluggish. This is partly seasonal.
But of course, we also have had concerns in the markets of oversupply and also OPEC maybe not having as much influence or power over its members to adhere to their quotas when it comes to production cuts. So OPEC wants production cuts. And then there are non-OPEC members, like the US, that are producing more oil.
So as OPEC members are shrinking in market share, you've got other players in the marketplace that are increasing their market share. And more analysts are right now reiterating their target for the year for oil. You've got B of A that just put out a note saying that they are reiterating $80 a barrel for oil as an average for this year. They don't underestimate Saudi Arabia's target to put oil at a higher level.
But nonetheless, we'll see where it takes us. But the range is that oil is going to stay around this range among the analysts. That's the consensus.
- Ines, shifting to the natural gas arena as well here, Southwestern and Chesapeake reportedly near a merger here. What's the latest with that story?
INES FERRÉ: Yeah, that's right. This is from a report from the "Wall Street Journal" that this deal could be announced as soon as next week. These are two companies, one with a market cap of $7 billion, the other one with $10 billion. So combined, this would be a combined company with a $17 billion market cap.
This would rank as one of the largest natural gas producers in the US. And Chesapeake's focus on natural gas would be more laser focused now if they do merge with Southwestern. And look, I've talked to analysts that have been telling me natural gas is oversold.
We have seen the price of natural gas go down considerably, but the market doesn't expect the prices to keep at these levels. Especially when you talk about liquefied natural gas, the US has been exporting more of that to Europe and to other places. And when we talk also about the electrification, the green energy-- I spoke to one analyst that was telling me, look, we still need energy, and natural gas is seen as one of the cleaner fossils out there when it comes to that transition, using that to get to the greener energy space.
- Ines, thanks so much. Enjoy the weekend.
INES FERRÉ: You too.
