Oil prices cooled during early Asian trading on Tuesday, following a 2 percent surge driven by recent supply interruptions in the U.S. and Russia. As of 01:06 GMT, March Brent oil futures fell to $80 a barrel, representing a 0.1 percent decrease. On the other hand, the U.S. West Texas Intermediate (WTI) crude futures slid by 0.1 percent, reaching $74.58 a barrel.
Supply and demand concerns
Operations at a major Russian fuel export terminal were suspended due to an alleged attack by Ukrainian forces. Meanwhile, extreme cold weather led to shutdowns at several oil production sites in the U.S.
North Dakota’s pipeline authority reported that more than 20 percent of production in the state, which ranks third in U.S. oil output, continued to be offline on Monday. This follows a reduction of half last week due to severe cold weather and operational difficulties.
These new supply interruptions occurred while there were ongoing geopolitical tensions in the Middle East. These factors supported oil prices, as supply disruptions could lead to tighter markets in the upcoming months.
However, crude prices could not achieve substantial gains because of a pessimistic outlook on oil demand. With China, the world’s top importer, showing signs of slowing economic recovery, market participants anticipate a weak demand for the said commodity.
Read: Davos 2024: Saudi Arabia’s non-oil economy grew 20% since 2016
Prolonged high interest rates
Besides concerns about supply and demand, the increasing expectations of prolonged high U.S. interest rates also impacted oil markets. The lower likelihood of early rate cuts by the Federal Reserve (Fed) strengthened the dollar, further driving oil prices down.
Attention is now focused on several crucial U.S. economic indicators scheduled for release this week. These include fourth-quarter GDP data, which is anticipated to show a slowdown in growth.
While GDP data will be released on Thursday, the PCE price index data will be due on Friday. The latter will likely confirm that inflation remained persistent through December, giving the central bank more reason to maintain higher interest rates.
Before this economic data arrives, traders also need to navigate central bank meetings in Japan and the Eurozone.
For more markets news, click here.
