Oil prices drop amid weak demand pressures

January 22, 2024 (MLN): Global oil prices recorded substantial losses on Monday due to pressure arising from a weak demand outlook which outweighed the geopolitical concerns in the Middle East.

Brent crude is currently trading at $77.79 per barrel, down by 0.56% on the day.

Meanwhile, West Texas Intermediate crude (WTI) is trading at $72.83 per barrel, down by 0.73% compared to the previous close.

Both benchmarks gained 0.2% and 0.75% respectively last week as the market weighed on potential supply disruptions stemming from the escalating conflicts in the Middle East.

"This morning's subdued re-open speaks volumes about current sentiment in the crude oil market despite ongoing geopolitical tensions in Europe and the Middle East," IG analyst Tony Sycamore said, as Reuters reported.

Prices barely budged despite an alleged Ukrainian drone attack at a huge Russian fuel export terminal.

Russian producer Novatek, opens new tab said on Sunday it had been forced to suspend some operations at the Baltic Sea terminal because of a fire.

In the absence any major escalation, crude is set for rangebound trading, with some downward pressure, said Vandana Hari, founder of oil market analysis provider Vanda Insights.

IG's Sycamore said oil fundamentals remain a headwind for prices.

“Oil production is higher and the growth outlook in China and Europe is mixed at best, while GDP data this week is expected to show the velocity of the U.S. economy has slowed considerably," he added.

The latest demand growth forecasts by the U.S. Energy Information Administration, the International Energy Agency and the Organization of the Petroleum Exporting Countries for 2024 are in a wide range between 1.24m and 2.25mbarrels per day although all three organizations expect demand to decelerate in 2025.

The number of oil rigs operating in the U.S. fell by two to 497 last week, their lowest since mid-November, Baker Hughes data showed on Friday.

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