The global oil benchmark Brent crude remained relatively stable, staying near the $83 per barrel mark, despite persistent worries about demand, on Monday. This stability was attributed to ongoing conflicts in the Middle East, which countered some of the concerns regarding demand fluctuations.
Brent crude futures saw a slight decline of 9 cents, reaching $83.38 a barrel by 1434 GMT. Meanwhile, the March contract for U.S. West Texas Intermediate (WTI) crude, set to expire on Tuesday, showed a modest increase of 20 cents, reaching $79.39 in subdued trading activity. However, the WTI April contract experienced a marginal decrease of 12 cents, settling at $78.34, according to Reuters report.
Last week, front-month Brent and WTI futures exhibited gains of approximately 1.5% and 3% respectively, signaling a growing apprehension regarding the potential escalation of conflict in the Middle East.
However, these gains were tempered by subdued demand projections from the International Energy Agency and a larger-than-anticipated rise in U.S. producer prices in January, intensifying concerns surrounding inflation.
“WTI and Brent eased on Monday morning as investors re-adjust to demand-side fears after a significant jump in U.S. producer price index numbers,” Phillip Nova analyst Priyanka Sachdeva was quoted as saying by Reuters.
On Friday, concerns over demand escalated following indications from U.S. Federal Reserve policymakers advocating a stance of “patience” regarding anticipated interest rate cuts.
Additionally, market participants are eagerly awaiting insights into China’s demand trajectory post its week-long Lunar New Year holiday, while trade activity is expected to remain subdued due to Presidents’ Day in the United States.
Amidst these developments, the conflict in the Middle East persisted over the weekend, with Israeli raids resulting in the closure of the Gaza Strip’s second-largest hospital.
Yemen’s Iran-aligned Houthi fighters claimed responsibility for targeting an oil tanker bound for India on Saturday. A British-registered cargo ship faced a potential sinking in the Gulf of Aden on Monday following a Houthi attack, while a U.S.-owned cargo ship reported two missile assaults in the same area, also on Monday, prompting a call for military support.
Since November, Houthi forces have engaged in attacks on vessels in the Red Sea and Gulf of Aden, citing solidarity with Palestinians amidst the conflict between Israel and Hamas militants in Gaza.
ANZ Research analysts noted in a report that the Organization of the Petroleum Exporting Countries (OPEC) possesses the capability to handle “a majority of disruption scenarios.” This assertion is supported by the fact that OPEC currently maintains spare capacity at its highest level in eight years, totaling 6.4 million barrels of oil per day.
(With inputs from Reuters)
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