Oil prices experienced a mixed day today, Tuesday, following previous losses. Global markets are grappling with a range of factors, including economic uncertainties, weather-related demand-supply issues in the U.S., and ongoing tensions in the Middle East. prompting more tanker diversions.
Oil prices
Brent crude futures saw an increase of approximately 0.09 percent, reaching $78.24 a barrel. This followed a 14-cent drop in the previous session. Hence, economic worries persisted, impacting sentiment across the commodity complex, even as tensions in the Red Sea escalated.
Meanwhile, U.S. West Texas Intermediate crude faced a 0.22 percent decrease, settling at $72.52 per barrel after the U.S. observed a public holiday on Monday.
Geopolitical tensions
Fears of weaker economic growth contributed to a drop in sentiment, despite rising tensions in the Red Sea, according to analysts at ANZ. Asian shares hit a one-month low, U.S. stock futures fell, and the dollar rose as central bankers’ hawkish remarks tempered expectations for interest rate cuts.
In the Middle East, tensions are rising with announcements of plans to expand targets in the Red Sea region. The disruptions have led to more oil ships avoiding the southern Red Sea, increasing shipping costs and transit times and affecting oil prices.
Therefore, a wait-and-see sentiment prevails in the oil market. Geopolitical conflicts are offset by the earlier accumulation of inventory in the United States. Hence, the escalation of tensions in the Middle East has not directly impacted oil production, limiting potential gains.
Read: Indicators suggest gold will maintain strength in 2024
Weather challenges
Extremely cold weather in the U.S. is garnering attention, potentially curbing oil production and affecting major refinery operations. North Dakota has already witnessed a decline in oil production by 400,000 to 425,000 barrels per day due to extreme cold and related operational issues.
While oil prices rose 2 percent last week in response to the escalating conflict in the Middle East, analysts believe that the lack of a direct impact on oil production is tempering potential gains. The global oil market remains sensitive to a complex interplay of geopolitical events, economic indicators, and weather-related challenges. Investors are closely monitoring these factors for their potential impact on future oil price movements.
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