By Ken Afor
Oil prices stabilised, Tuesday, following a decline in the previous session, as market participants assessed the impact of Middle East tensions alongside concerns about demand and the increasing supply from the Organization of the Petroleum Exporting Countries (OPEC).
At 07:07 GMT, Brent crude futures experienced a modest increase of 17 cents, equivalent to 0.2%, reaching $76.29 per barrel.
Similarly, U.S. West Texas Intermediate (WTI) crude futures saw a slight uptick of 0.1%, or 5 cents, settling at $70.82 per barrel.
These benchmarks had faced a decline of more than 3% and 4% individually on Monday due to significant price reductions implemented by Saudi Arabia, the leading exporter, and an escalation in OPEC production levels.
“Saudi Arabia’s sharp price cuts and OPEC’s increased production have offset supply concerns caused by escalating geopolitical tensions in the Middle East,” said CMC Markets analyst Leon Li.
Meanwhile, the Israeli military has expressed its determination to continue its battle against Hamas until 2024, raising concerns among markets about the potential escalation of the Gaza war into a regional crisis that may disrupt oil supplies in the Middle East.
U.S. Secretary of State Antony Blinken touched down in Tel Aviv on Monday evening to provide Israeli officials with an update on his extensive discussions with Arab leaders regarding the resolution of the ongoing conflict.
Despite efforts to control prices, a recent Reuters survey revealed that OPEC oil production increased in December. This rise was primarily driven by Angola, Iraq, and Nigeria, which offset the ongoing production cuts by Saudi Arabia and other members of the OPEC+ alliance.
As a result of the increased supply, Saudi Arabia decided to lower the official selling price of its flagship Arab Light crude to Asia for February. This reduction brought the price to its lowest level in 27 months.
Suvro Sarkar, the energy sector team lead at DBS Bank, predicts that oil prices will probably fluctuate within the range of $75 to $80 per barrel in the foreseeable future.
He said, “Barring an unforeseen flare up in the Middle East situation. On the supply side, there are some bullish factors from the closure of Libya’s largest oilfield, which has affected around 0.3 million barrels per day of oil production.”
In light of traders’ confidence in multiple Federal Reserve rate cuts this year, the dollar took a breather on Tuesday, providing support to prices. This pause in the dollar’s rally has the potential to boost oil prices, making crude more affordable for those holding other currencies.
On Monday, Federal Reserve Governor Michelle Bowman expressed her belief that U.S. monetary policy is currently “sufficiently restrictive” and indicated her readiness to back future interest-rate cuts as inflation subsides.
The market eagerly anticipates the release of U.S. inventory data by the American Petroleum Institute (API) industry group later today.
