Oil prices saw a marginal uptick on Tuesday, recovering from the previous session’s decline, as global markets balanced escalating tensions in the Middle East with apprehensions about demand and increasing OPEC supply.
At 0445 GMT, Brent crude futures edged up by 18 cents, or 0.2%, reaching $76.30 a barrel. Concurrently, U.S. West Texas Intermediate crude futures registered a modest increase of 0.1%, or 6 cents, reaching $70.83 a barrel.
The previous day witnessed a notable drop of over 3% and 4% for Brent and West Texas Intermediate crude, respectively. This decline was attributed to significant price reductions by Saudi Arabia, the leading oil exporter, and an uptick in OPEC production.
CMC Markets analyst Leon Li noted, “Saudi Arabia’s sharp price cuts and OPEC’s increased production have offset supply concerns caused by escalating geopolitical tensions in the Middle East.”
Concerns about the ongoing conflict in Gaza have added complexity to the situation. The Israeli military declared its intent to continue its battle against Hamas through 2024, raising fears that the conflict could escalate into a regional crisis, potentially disrupting oil supplies from the Middle East.
U.S. Secretary of State Antony Blinken’s arrival in Tel Aviv on Monday aimed to brief Israeli officials on his discussions with Arab leaders regarding efforts to end the war.
However, despite these geopolitical concerns, a Reuters survey conducted on Friday indicated a rise in OPEC oil output for December. Saudi Arabia’s decision to cut the official selling price of its flagship Arab Light crude to Asia for February added to the challenges, reaching the lowest level in 27 months.
Suvro Sarkar, the energy sector team lead at DBS Bank, suggested that oil prices are likely to fluctuate within the $75 to $80 per barrel range in the near term. He added, “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.”
Supporting the oil prices, the dollar paused its rally on Tuesday. A weaker dollar tends to boost oil prices as crude becomes more affordable for holders of other currencies.
Federal Reserve Governor Michelle Bowman’s comments on Monday, viewing U.S. monetary policy as “sufficiently restrictive” and signaling openness to support potential interest-rate cuts as inflation eases, contributed to market dynamics.
Investors are eagerly awaiting U.S. inventory data from the American Petroleum Institute later in the day for further insights into market trends.