Oil prices drop for 2nd consecutive day after last week's rally

January 07, 2025 (MLN): Oil prices eased on Tuesday, extending losses into a second consecutive session after last week's rally, although concerns about tighter Russian and Iranian supply amid widening Western sanctions checked losses.

Brent crude futures decreased by $0.18, or 0.24%, to $76.12 per barrel.

West Texas Intermediate (WTI) crude futures declined by $0.22, or 0.30%, to $73.34 per barrel by [12:50 pm] PST.

Both benchmarks slid on Monday, after rising for five days in a row last week to settle at their highest levels since October on Friday amid expectations of more fiscal stimulus to revitalize China's faltering economy.

"This week's weakness is likely due to a technical correction," said Priyanka Sachdeva, senior market analyst at Phillip Nova, Reuters added.

"Traders are reacting to softer economic data globally, which undermines the optimism seen earlier, particularly from bearish economic news from the U.S. and Germany", Priyanka Sachdeva added.

Also dragging on oil prices is the rising supply from non-OPEC countries that, coupled with weak demand from China, is expected to keep the oil market well-supplied this year.

Market participants are waiting for more data this week, such as the U.S. December nonfarm payrolls report on Friday, for clues on U.S. interest rate policy and oil demand outlook.

"The move higher in crude oil prices appears to be running out of momentum," ING analysts wrote in a note.

"While there has been some tightening in the physical market, fundamentals through 2025 are still set to be comfortable, which should cap the upside."

Worries over tightening Russian and Iranian supply amid sanctions, however, kept a floor under oil prices, Reuters further noted.

The uncertainty has translated into better demand for Middle Eastern oil, reflected in a hike in Saudi Arabia's February oil prices to Asia, the first such increase in three months.

Money managers raised their net long U.S. crude futures and options positions in the week to Dec. 31, the U.S. Commodity Futures Trading Commission said on Monday.

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