Newsoil, oil forecast
Jan 22, 2024 07:00 AM EST
Monday saw a further decline in oil prices as geopolitical worries in the Middle East and the attack on a Russian fuel export facility over the weekend were countered by economic headwinds that put pressure on the forecast for global oil consumption.
After falling 54 cents on Friday, Brent crude dropped 23 cents, or 0.3%, to $78.33 a barrel by 07:32 GMT on Saturday.
In the first month of the U.S., with the contract scheduled to expire later on Monday, West Texas Intermediate oil futures for February delivery were down 28 cents to $73.13 a barrel. The more active WTI contract for March was down 21 cents to $73.04 a barrel.
"This morning's subdued re-open speaks volumes about current sentiment in the crude oil market despite ongoing geopolitical tensions in Europe and the Middle East," Tony Sycamore, an IG analyst, stated.
Despite an alleged drone strike at a large Russian petroleum export station by Ukraine, prices hardly moved. A fire at the Baltic Sea terminal caused Russian manufacturer Novatek (NVTK.MM), to halt certain operations on Sunday.
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According to Vandana Hari, the founder of oil market monitoring company Vanda Insights, crude is expected to trade in a range with some downward pressure until there is a significant increase.
While the United States destroyed another anti-ship missile that Yemen's Houthi terrorists were about to send into the Gulf of Aden on Saturday, the Middle East's Gaza conflict continues.
International trade has been hampered by the attacks in the Red Sea and the Gulf of Aden by the organization associated with Iran.
Along with tightening the crude markets in Europe and Africa, it also caused the Brent contract's first-month premium over the six-month contract to rise to $1.99 on Friday, the highest level since November. This pattern, known as backwardation, suggests that there is a perceived shortage in order to ensure timely delivery.
Oil fundamentals are still a pricing headwind, according to IG's Sycamore. Petroleum "production is higher and the growth outlook in China and Europe is mixed at best, while GDP data this week is expected to show the velocity of the U.S. economy has slowed considerably," he stated.
The most recent estimates of demand growth from the U.S, despite the fact that all three agencies anticipate a slowdown in demand in 2025, the Energy Information Administration, the International Energy Agency, and the Organization of the Petroleum Exporting Countries have projected 2024 production levels that fall between 1.24 million and 2.25 million barrels per day.
According to Baker Hughes statistics released on Friday, the number of oil rigs in operation in the United States decreased by two to 497 last week, the lowest since mid-November.
In a related development, the national oil firm NOC said that production at Libya's Sharara oilfield resumed on Sunday following the end of a sit-in by protestors that had stopped output since early January.
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