Oil prices were little changed today as traders weighed a host of conflicting supply and demand worries, with rising tensions in the Middle East and cold weather woes disrupting production in the United States.
Brent crude futures fell 2 cents to $80.04 a barrel by 0353 GMT, while US West Texas Intermediate crude futures (WTI) were last down 1 cent at $74.75 a barrel.
Both the contracts had settled about 2% higher on Monday, as a Ukrainian drone strike on Novatek’s Ust-Luga fuel export terminal raised supply concerns and drove up prices. Analysts say Novatek is likely to resume large-scale operations there within weeks.
While damage to loading berths at the Ust-Luga terminal only “briefly impacted exports,” the move raises the prospect of the Russia-Ukraine war “moving into a new phase where parties target key energy infrastructure,” analysts at ANZ Research said in a note.
In the Middle East, US and British forces have also carried out a fresh round of strikes targeting a Houthi underground storage site and missile and surveillance capabilities used by the Iran-aligned Houthi group.
The attacks by the Houthis on vessels in and around the Red Sea region have disrupted global shipping and stoked fears of inflation. The group has said their attacks are in solidarity with Palestinians as Israel strikes Gaza.
Some analysts remained bullish on near-term market fundamentals because of these ongoing conflicts.
Red Sea Crisis | US and UK launch overnight airstrikes on Houthi targets in Yemen:
“Without any recession concerns, the impact of extreme weather on US crude oil production and the escalation of geopolitical conflicts still support oil prices,” said CMC Markets’ Shanghai-based analyst Leon Li.
In the US, 20% of North Dakota’s oil output remained shut in due to extreme cold and operational challenges, the state’s pipeline authority said yesterday.
Weighing on markets, however, are concerns over China’s sputtering economic recovery, which is raising worries about global oil demand given the Asian giant is the world’s biggest crude oil importer.
Chinese policymakers have rolled out a raft of measures to shore up the economy but domestic consumption remains tepid, leaving oil traders on edge about demand prospects.
“Given conflicting fundamental factors right now in WTI crude (market), the momentum factor is likely to be the main driver in setting the stage for oil prices in the short term,” said OANDA senior markets analyst Kelvin Wong.
WTI crude prices managed to close above their 50-day moving average yesterday for the first time since October 24 last year. The bullish close followed a similar daily close above the 20-day moving average last Thursday, he added.
A Reuters poll showing that US crude oil inventories were forecast to fall by about 3 million barrels in the week to January 19 also limited price weakness. Distillate stockpiles were expected to drop last week, while gasoline inventories were set to rise. Official government data is expected to be out tomorrow.
