Onome Amuge
Oil prices fell further on Tuesday, sustaining the downward trend from the previous day’s trading after last week’s upturn. Nevertheless, the losses were tempered as market participants remained apprehensive over the potential supply crunch from major crude exporters Russia and Iran, which face mounting Western sanctions.
Brent crude futures, saw a slight decline of 8 cents, or 0.1 percent, hovering around $76.22 per barrel during early Asian trading hours, while U.S. West Texas Intermediate (WTI) crude dipped 15 cents, or 0.19 percent, to settle at $73.42.
Both benchmarks retreated on Monday after a five-day rally last week that propelled prices to their highest levels since October. The rally was fueled by market expectations of more economic stimulus measures from China to kickstart its slowing economy.
Adding to the downward pressure on oil prices is the rising supply from non-OPEC countries, which, coupled with subdued demand from China, is anticipated to ensure ample crude oil supply throughout 2023.
Amidst these developments, market players are eagerly awaiting additional data this week, particularly the U.S. December nonfarm payrolls report due on Friday. The report is expected to shed light on the health of the U.S. labour market, potentially informing future interest rate decisions by the Federal Reserve and shaping market sentiment towards oil demand.
ING analysts have identified a potential exhaustion of the upward momentum in crude oil prices. The firm’s assessment indicates that, despite the emergence of some physical market tightening, global supply and demand dynamics are expected to be well-balanced through 2025.
According to them, the upward trend in crude oil prices appears to be losing steam, largely due to projections of ample global supply and demand over the next few years.
Despite these downward pressures, lingering concerns over potential supply disruptions from Russia and Iran, exacerbated by ongoing sanctions, have propped up oil prices, acting as a safety net against steeper declines.
These uncertainties have already triggered stronger demand for Middle Eastern crude oil, reflected in Saudi Arabia’s recent decision to hike its official selling prices (OSPs) to Asian customers for February deliveries, marking the first increase in three months.
