Oil prices fell on Tuesday, February 20, with an uncertain outlook for global demand knocking value off crude futures contracts, despite some risk premium from the Israel-Hamas conflict.
Tensions in the Red Sea continue, with the crew of a ship abandoning the vessel after the attack on Sunday evening, the first such evacuation since the Yemen-based group started targeting ships late last year. However, the conflict in the Middle East, one of the world’s major oil-producing regions, has not been enough to counter crude investors’ worries about flagging the global demand.
Brent futures dipped 22 cents or 0.26 per cent to $83.34 a barrel. The six-month spread for Brent on Tuesday was also at its highest since October, in a sign of a tighter market. US West Texas Intermediate (WTI) crude for April delivery fell 26 cents, or 0.33 per cent, to $78.20 a barrel, after earlier paring $1. The March WTI contract gained 36 cents or 0.45 per cent to $79.55 a barrel ahead of its expiry during the session, according to news agency Reuters.
Back home, on the Multi Commodity Exchange (MCX), crude oil futures due for a March 19 expiry, was last trading 1.78 per cent lower at ₹6,402 per bbl, having swung between ₹6,385 and ₹6,524 per bbl during the session, against a previous close of ₹6,518 per barrel.
What’s weighing on crude oil prices?
-Crude markets were “marginally lower” in “quiet trading over the Presidents’ Day holiday in the US and as demand concerns offset ongoing Middle Eastern geopolitical tensions”, said IG market analyst Tony Sycamore in a note.
-Various countries are increasing efforts to secure a ceasefire between Israel and Hamas in Gaza as the threat of an Israeli assault on the city of Rafah looms. The UN has warned an assault “could lead to a slaughter”.
-Shipping has suffered as the conflict in the Middle East threatens to escalate, with energy markets particularly vulnerable. In support of Palestinians, Iran-aligned Houthis have increased attacks on shipping lanes in the Red Sea and Bab al-Mandab Strait, with at least four more vessels hit by drone and missile strikes since Friday.
A bearish International Energy Agency (IEA) report last week revised the 2024 oil demand growth forecast downward, to almost a million barrels a day less than producer group OPEC’s outlook.
-In a bearish report, the International Energy Agency (IEA) last week revised the 2024 oil demand growth forecast downward. The agency expects global oil demand growth to decelerate to 1.22 million barrels per day (bpd) in 2024, about half of the growth seen last year, in part due to a sharp slowdown in Chinese consumption. It had previously forecast 2024 demand growth of 1.24 million bpd.
-The Organization of the Petroleum Exporting Countries (OPEC) on Tuesday stuck to its forecast for relatively strong growth in global oil demand in 2024 and 2025 and raised its economic growth forecasts for both years saying there was further upside potential. OPEC expects oil use to keep rising for the next two decades.
-The IEA estimated global oil demand will grow by 1.22 million barrels per day (bpd) this year, while OPEC’s growth forecast is 2.25 million bpd. The IEA trimmed its 2024 growth forecast to almost a million barrels a day less than producer group OPEC’s outlook.
-The two are clashing in part over the shift to renewable and cleaner energy, with the IEA, which represents industrialised countries, predicting oil demand will peak by 2030 while OPEC expects oil use to keep rising for the next two decades.
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