Oil continues to rise as geopolitics dominates concerns about demand.
Oil continues to rise as geopolitics dominates concerns about demand.
Written by Natalie Grover
22 January 2024, 7:08 p.m.
January 22, London (Reuters) - Oil prices increased on Monday as traders balanced the effects of the hostilities in the Middle East and Ukraine on the supply of oil against the pressures from economic headwinds on the demand for oil around the world.
By 1141 GMT, Brent crude had gained 22 cents to $78.78 per barrel.
In choppy trading, the front-month U.S. West Texas Intermediate crude futures contract for February delivery saw a 31-cent increase to $73.72 a barrel. The contract expires on Monday. At $73.51, the more actively traded March WTI contract was up 26 cents.
"This morning's subdued reopen speaks volumes about current sentiment in the crude oil market despite ongoing geopolitical tensions in Europe and the Middle East," Tony Sycamore, an analyst with IG, said.
Israel's offensive against Gaza shows no signs of stopping, while the Houthis, who are affiliated with Iran, are still attacking commercial vessels in the Red Sea despite US retaliation.
The scenario has tightened the petroleum markets in Europe and Africa, and on Friday it caused the difference between the front-month Brent contract and the six-month contract to reach its greatest level since November.
This phenomenon, known as "backwardation," denotes a belief in a more constrained supply for timely delivery.
In the meantime, NVTK.MM, a Russian energy corporation, creates a new tab Due to a fire, Novatek was forced to halt part of its operations at its gasoline export terminal located in the Baltic Sea, the company announced on Monday.
Analysts told Reuters that the problem, which is anticipated to impede the flow of naphtha into Asia, might be rectified in a few weeks.
Sycamore of IG predicted that the fundamentals of oil will continue to weigh against prices.
According to him, oil production has increased, the growth prospects in China and Europe are bleak at best, and this week's GDP data is predicted to demonstrate that the U.S. economy's pace of expansion has significantly slowed.
According to Tamas Varga of oil broker PVM, "investors want to be bullish, but tepid data and a cautious narrative from policymakers keep them on the backfoot."
The Organisation of the Petroleum Exporting Countries, the International Energy Agency, and the U.S. Energy Information Administration have all released their most recent demand growth projections for 2024, and they range widely from 1.24 million to 2.25 million barrels per day. However, all three organisations anticipate a slowdown in demand growth in 2025.
In a related development, protesters abandoned a sit-in that had stopped output at Libya's Sharara oilfield since early January, allowing production to resume on Sunday, according to state oil company NOC.
Contributing reporters: Mohi Narayan, Florence Tan, and Natalie Grover David Goodman handled the editing.
Source reuters.com
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