Oil Price Softening Amid Global Demand Concerns and Geopolitical Tensions

23 Jan 2024 , 08:31 AM

Early trading on Tuesday saw an easing of oil prices as concerns about the future for oil demand worldwide outweighed geopolitical tensions in the Middle East and supply concerns in the wake of an attack on a Russian fuel export terminal over the weekend.

Brent oil futures had down 14 cents, or 0.2%, to $79.92 per barrel, while US West Texas Intermediate (WTI) futures had dropped 10 cents, or 0.1%, to $74.66 per barrel.

Due to increased supply fears and higher prices following a Ukrainian drone strike on Novatek’s Ust-Luga gasoline export station, both futures finished roughly 2% higher on Monday. Within a few weeks, analysts predict Novatek will begin extensive operations there.

As the world’s largest importer of crude oil, the Asian behemoth’s faltering economic recovery has cast a shadow over geopolitical tensions. This has consequently increased concerns about the demand for oil globally.

Although Chinese officials have implemented a number of policies aimed at strengthening the economy, the country’s low level of domestic consumption has worried oil dealers about the future of demand.

In the Middle East, as Israeli forces advanced deep into western Khan Younis in Gaza, they stormed one hospital and besieged another, calling on Israel to protect patients, medical staff, and innocent bystanders.

A new series of attacks by US and British forces has also targeted a Houthi subterranean storage facility, as well as missile and monitoring systems utilised by the Houthi militia, which is affiliated with Iran.

Global trade has been hampered and inflation fears have been heightened by the Houthis’ attacks on vessels in and around the Red Sea region. According to the group, they are attacking in support of Palestinians during Israel’s assault on Gaza.

In a related development, a Reuters survey indicated that a 3 million barrel decline in US crude oil stockpiles was anticipated in the week leading up to January 19. Last week, petrol inventories were predicted to climb while distillate stockpiles were predicted to decline.

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