By Ken Afor
After initially increasing on Monday, oil futures shifted direction due to persistent anxiety concerning the OPEC+ decision and apprehension about the possible expansion of global fuel demand.
Nevertheless, the threat of supply disruption resulting from the Middle Eastern tensions did restrict the size of the declines.
At 0406 GMT, Brent crude futures had dropped 0.6% (or 49 cents) to $78.39 per barrel, while U.S. West Texas Intermediate crude futures had fallen 0.6% (or 42 cents) to $73.65 per barrel.
“Crude seems to be under continued pressure from the OPEC+ decision. Some degree of discounting of the deeper OPEC+ cuts is justified, but as of now, the crude complex has completely disregarded them,” said Vandana Hari, founder of oil market analysis provider Vanda Insights.
Last week, due to lack of faith from investors with regards to the magnitude of reductions in supply by the OPEC+ (comprising Organization of the Petroleum Exporting Countries and Russia), and worries about the tortoise-like progress of worldwide industrial production, oil prices dropped by over 2%.
Investors were uncertain about the voluntary OPEC+ cuts declared on Thursday as to whether or not they would be followed through on and how they would be monitored.
Investors’ attention was directed not only to the geopolitical situation, but also to the recent upsurge of fighting in Gaza.
On Sunday, the US military confirmed that three commercial vessels had been attacked in the southern Red Sea, with Yemen’s Houthi group claiming drone and ballistic missile strikes against two Israeli vessels in the area.
Oil prices received a bullish boost due to the resurgence of the Israel-Hamas war, according to CMC Markets analyst Tina Teng.
“However, oil prices may continue to be under pressure for the time being due to China’s disappointing economic recovery and the ramp-up of U.S. production,” Teng said.
U.S. oil rigs rose five to 505 this week, their highest since September, energy services firm Baker Hughes (BKR.O) said in its closely followed report on Friday.
Western countries have increased their efforts to guarantee the $60 a barrel price ceiling on sea-borne exports of Russian oil to reprimand Moscow for its involvement in the Ukraine war.
On Friday, Washington brought additional sanctions upon three separate entities and three oil tankers.
On Friday, the White House announced they were ready to put a ‘pause’ on sanctions relief for OPEC member Venezuela in the near future, unless there were more developments on the releasing of Venezuelan political prisoners as well as the ‘wrongfully detained’ Americans.
Despite this, India has resumed buying Venezuelan oil.
