Due to weakening demand, oil prices declined for the second consecutive day on Monday.
Brent crude decreased by 41 cents, or 0.5 percent, bringing its price to US$78.15 per barrel as of 01:05 GMT. On Friday, Brent crude already dipped by 54 cents. On the other hand, the U.S. West Texas Intermediate (WTI) crude futures, scheduled for February delivery, declined to $73.39 per barrel. This reflects a modest loss of 2 cents. Meanwhile, the more actively traded March WTI contract was priced at $72.95 per barrel, representing a 30-cent decrease.
Ongoing geopolitical tensions are a primary driver behind lower demand for oil. IG Analyst Tony Sycamore said, “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.”
More factors
Apart from geopolitical rifts, many other factors are affecting oil prices. For instance, severe cold weather across the U.S., the largest fuel-consuming and fuel-producing nation worldwide, further disrupted activities.
China, the world’s largest importer, has also demonstrated sluggish economic recovery. Its less-than-expected growth in the fourth quarter of 2023 has notably impeded a significant rise in oil prices this month.
Amid such concerns that weaken demand, traders have been paying less attention to potential disruptions in Russian fuel exports. Russia is the third-largest producer of oil globally.
According to a Reuters report, energy company Novatek reported the suspension of some operations at a key Baltic Sea fuel export terminal following an alleged Ukrainian drone strike. This development could have caused a spike in oil prices.
Looking ahead to the first half of 2024, the overall oil market is still expected to remain well-stocked. This is mainly due to the U.S. reaching record levels of oil production. Additionally, the Organization of the Petroleum Exporting Countries (OPEC) is only making limited reductions in their oil output.
Read: Top oil-producing countries in the world
Key meetings
Market participants are also waiting for several major meetings to unfold in the coming days for further guidance on potential movements in oil prices.
The Bank of Japan will convene on Tuesday. Experts and traders generally expect the Japanese central bank to continue its ultra-dovish monetary policy. Meanwhile, the European Central Bank (ECB)’s will also meet later this week. The ECB is likely to reinforce its stance on maintaining higher interest rates for a prolonged period, which could negatively impact economic activity within the region.
Additionally, the U.S. Federal Reserve will meet from January 30 to 31, 2024. The country will release its gross domestic product data for the fourth quarter ahead of this anticipated meeting.
For more markets news, click here.
