Oil prices fell on Tuesday, Jan. 23, paring some of the previous day’s gains, as traders weighed rising crude supplies in Libya and Norway against production disruptions in the United States and geopolitical tensions. Oil futures remain volatile as uncertainty lingers around several indicators of supply and demand.
Brent crude futures were down 58 cents, or 0.72 percent, at $79.48 a barrel. U.S. West Texas Intermediate (WTI) crude futures were down 45 cents, or 0.6 percent, at $74.31 a barrel. Brent slipped back below $80 a barrel after settling above the threshold on Monday for the first time since December 26.
Also Read: India’s crude oil production down 1.03% to 2.5 MMT in December, imports up 1.1% YoY: PPAC
At home, on the Multi Commodity Exchange (MCX), crude oil futures ahead of February 16 expiration last traded 0.06 percent lower at ₹6,261 per bbl, having swung between ₹6,118 and ₹6,265 per bbl during the session, against a previous close of ₹6,265 per barrel.
The International Energy Agency (IEA) this week raised its global demand forecast for 2024, but its projection is half that of producer group Organization of the Petroleum Exporting Countries (OPEC). The Paris-based agency also said that – apart from major disruptions to flows – the market looked quite well supplied in 2024.
Last week, OPEC said in its monthly report that it expects demand growth of 2.25 million bpd this year, unchanged from its forecast in December. The producer group also said that oil demand is expected to increase by a robust 1.85 million bpd in 2025 to 106.21 million bpd.
What weighs on crude oil prices?
-Crude prices rose about two percent on Monday after a Ukrainian drone strike on Novatek’s Ust-Luga Baltic fuel export terminal near Russia’s second city St. Petersburg raised supply concerns. The drone strike was a timely reminder that a larger, more influential war continues to rage, analysts say.
-Tensions also rose in the Middle East, where American and British forces carried out a second joint round of strikes against Houthi positions in Yemen on Monday night. Norway’s crude output rose to 1.85 million barrels per day (bpd) in December, up from 1.81 million bpd the previous month.
-In Libya, production in the 300,000 bpd Sharara oil field resumed on January 21 following the end of protests that had halted production since the beginning of this month. However, supply remains limited in the United States.
Read also: “Oil markets well supplied”, says IEA as it raises global demand forecast for 2024; projects lower than OPEC
Where are the prices going?
Crude oil prices experienced a significant two percent increase in international markets due to supply disruptions from both Russia and the United States, analysts said. Ukrainian drone attacks on the Russian Novatek fuel terminal further contributed to the increase in oil prices on the global stage.
Also, severe cold weather conditions in North Dakota, USA, are adversely affecting oil production, providing further support to prices. Geopolitical tensions in the Middle East are also contributing to the upward trend in crude oil.
Despite the positive factors, the strength of the dollar index and the absence of stimulus support from the People’s Bank of China (PBOC) may require limitations to the potential gains for crude oil. Anticipating continued volatility, we observe that crude oil has a support level at $74.10-73.50, with resistance set at $75.15-75.80 for the current session. As for INR, oil finds support at ₹6,205-6,130, while facing resistance at ₹6,350-6,420,” said Rahul Kalantri, VP Commodities, Mehta Equities Ltd.
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Published: 23 Jan 2024, 22:07 IST