The global oil benchmark Brent crude remained relatively stable, remaining near the $83 per barrel, despite persistent concerns 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 US West Texas Intermediate (WTI) crude, which expires on Tuesday, showed a modest increase of 20 cents, reaching $79.39 in subdued trading activity. However, the April WTI contract experienced a marginal decline of 12 cents, settling at $78.34, according to a Reuters report.
Last week, front-month Brent and WTI futures posted gains of around 1.5% and 3% respectively, signaling growing fears about the potential escalation of conflict in the Middle East.
However, these gains were moderated by subdued demand projections from the International Energy Agency and a larger-than-expected increase in US producer prices in January, intensifying inflation concerns.
“WTI and Brent eased on Monday morning as investors readjusted to demand-side fears after a significant jump in US producer price index numbers,” Phillip Nova analyst Priyanka Sachdeva told Reuters.
On Friday, concerns about demand increased following indications from US Federal Reserve policymakers that they are advocating an attitude of “patience” on anticipated interest rate hikes.
Additionally, market participants are eagerly awaiting insights into China’s demand trajectory following its week-long Lunar New Year holiday, while business activity is expected to remain subdued due to Presidents’ Day in the US.
Amid these developments, the conflict in the Middle East continued over the weekend, with Israeli attacks resulting in the closure of the Gaza Strip’s second largest hospital.
Yemen Iran-aligned Houthi fighters claimed responsibility for targeting an oil tanker bound for India on Saturday. A British-registered cargo ship faced possible sinking in the Gulf of Aden on Monday after a Houthi attack, while a US cargo ship reported two missile attacks in the same area, also on Monday, prompting calls for military support.
Since November, Houthi forces have engaged in attacks on ships in the Red Sea and Gulf of Aden, citing solidarity with Palestinians amid 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) has the ability to handle “the majority of disruption scenarios”. This claim is supported by the fact that OPEC currently maintains reserve capacity at its highest level in eight years, naming 6.4 million barrels of oil per day.
(With inputs from Reuters)
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Published: 19 Feb 2024, 22:03 IST