February 19, 2024 (MLN): Global oil prices dropped during the early trading hours of Monday as investors assessed the demand outlook following reports of higher producer prices in the U.S., the world's biggest oil user.
Brent crude is currently trading at $82.22 per barrel, down by 0.56% on the day.
While West Texas Intermediate crude (WTI) is trading at $77.75 per barrel, up by 0.47% on the day.
It is important to highlight here that both benchmarks surged last week with a gain of over 1.3% driven by a dollar sell-off and persisted tensions in the Middle East.
"WTI and Brent eased on Monday morning as investors re-adjust to demand-side fears after a significant jump in U.S. producer price index numbers," said Phillip Nova analyst Priyanka Sachdeva in a research note, as Reuters reported.
U.S. producer prices increased more than expected in January amid strong gains in the costs of services, which could amplify inflation worries.
Markets are also yet to see the direction of demand from China after that country returns from a week-long Lunar New Year holiday, while Presidents' Day in the United States is set to keep trade relatively muted.
Moreover, Federal Reserve policymakers on Friday signalled "patience" toward interest rate cuts. Higher rates keep up the cost of buying oil, providing for a bearish market trend.
Over the weekend, tension in the Middle East continued as Israeli raids put the Gaza Strip's second-largest hospital out of service, and Yemen's Iran-aligned Houthi fighters claimed responsibility for an attack on an India-bound oil tanker.
The Organization of the Petroleum Exporting Countries (OPEC) would be able to cover "most levels of disruption", ANZ Research analysts said in a client note, as its spare capacity is at an eight-year high of 6.4 million barrels of oil per day.
"The market was also reminded of the uncertain outlook for demand, with the International Energy Agency warning that growth is expected to lose its steam in 2024," ANZ said. The agency forecasts a market surplus during the year.
The United Nations Security Council is likely to vote on Tuesday on an Algerian push for the 15-member body to demand an immediate humanitarian ceasefire in the Israel-Hamas conflict, diplomats said, with the United States signaling it would veto.
In Europe, Russia on Sunday said it had full control of the Ukrainian town of Avdiivka in its biggest gain in nine months, days ahead of the two-year anniversary of its invasion.
It was not immediately clear whether the death of Alexei Navalny, President Vladimir Putin's most high-profile opponent, in a Russian Arctic penal colony on Friday would trigger new sanctions on Moscow, the world's second-biggest oil exporter.
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Posted on: 2024-02-19T10:56:39+05:00
