Oil prices witnessed fluctuations on Tuesday, January 23, retracting some of the gains from the preceding day as traders assessed the balance between increasing crude supply in Libya and Norway against production disruptions in the United States and geopolitical tensions. The oil futures market remains in a state of flux, grappling with uncertainties surrounding various supply and demand indicators.
Brent crude futures saw a decline of 58 cents, or 0.72 per cent, settling at $79.48 a barrel. Meanwhile, US West Texas Intermediate crude futures (WTI) experienced a decrease of 45 cents, or 0.6 per cent, reaching $74.31 a barrel. Brent slipped below the $80 per barrel mark after achieving a settlement above this threshold on Monday, marking the first time since December 26.
On the domestic front, crude oil futures on the Multi Commodity Exchange (MCX), slated for a February 16 expiry, showed a marginal decrease of 0.06 per cent, trading at ₹6,261 per barrel. The session witnessed fluctuations between ₹6,118 and ₹6,265 per barrel, compared to the previous close of ₹6,265 per barrel.
The International Energy Agency (IEA) recently increased its 2024 global demand forecast, albeit being half of the projection made by the Organisation of Petroleum Exporting Countries (OPEC). The IEA, based in Paris, also expressed that, barring significant disruptions, the market appears reasonably well supplied in 2024.
OPEC, in its monthly report last week, maintained its forecast of a demand growth of 2.25 million barrels per day (bpd) in 2024, consistent with the December projection. Additionally, the producer group anticipated robust oil demand growth of 1.85 million bpd in 2025, reaching a total of 106.21 million bpd.
Factors Influencing Crude Oil Prices:
A two per cent surge in crude prices on Monday ensued following a Ukrainian drone strike on Novatek’s Ust-Luga Baltic fuel export terminal near St Petersburg, Russia, raising supply concerns.
Geopolitical tensions escalated in the Middle East with joint US and British strikes on Houthi positions in Yemen, contributing to market apprehensions.
Norway’s crude production increased to 1.85 million bpd in December, up from 1.81 million bpd the previous month.
In Libya, the Sharara oilfield resumed production on January 21 after the end of protests that had halted output earlier this month. However, supply constraints persist in the US.
Analysts predict that the surge in international oil prices is a result of supply disruptions from both Russia and the United States. Ukrainian drone strikes and adverse weather conditions in North Dakota further contribute to the upward trend. While geopolitical tensions in the Middle East add to the positive factors, the strength of the dollar index and the absence of stimulus support from the People’s Bank of China may impose limitations on potential gains for crude oil.
Anticipating ongoing volatility, experts note that crude oil has support levels at $74.10–73.50, with resistance set at $75.15-75.80 for the current session. In terms of INR, crude oil finds support at ₹6,205-6,130, facing resistance at ₹6,350-6,420, according to Rahul Kalantri, VP Commodities at Mehta Equities Ltd.