Oil prices edge lower amidst economic uncertainties

January 16, 2024 (MLN): Global oil prices edged lower on Tuesday as markets weighed broad economic concerns against weather-related U.S. demand-supply issues and continued tensions in the Middle East that led to more tanker diversions.

Brent crude is currently trading at $78.18 per barrel, down by 0.09% on the day.

Meanwhile, West Texas Intermediate crude (WTI) is trading at $72.83 per barrel, down by 0.11% compared to the previous close.

Both benchmarks dropped 0.8% and 1.48% respectively last week as the price cuts by Saudi Arabia and the rise in OPEC output weighed dominant over the market.

"Fears of weaker economic growth weighed on sentiment across the commodity complex. This was despite rising tensions in the Red Sea," ANZ analysts said in a client note, as Reuters reported.

Asian shares dropped to a one-month low, U.S. stock futures fell and the dollar rose on Tuesday as hawkish remarks from central bankers tempered expectations for interest rate cuts, ahead of an economic outlook speech by the U.S. Federal Reserve's Christopher Waller on Tuesday.

"At present, the wait-and-see sentiment in the oil market is relatively heavy, with the escalation of geopolitical conflicts offset by the (earlier) accumulation of inventory (in the U.S.)," said CMC Markets' analyst Leon Li.

Extremely cold weather in the U.S. that could curb oil production and also affect major refinery operations was in focus as well, analysts said.

North Dakota oil production has already fallen by 400,000 to 425,000 barrels per day on extreme cold and related operational issues.

In the Middle East, Yemen's Houthi movement will expand its targets in the Red Sea region to include U.S. ships, an official from the Iran-allied group said on Monday, as it vowed to keep up attacks after U.S. and British strikes on its sites in Yemen.

More oil tankers were steering clear of the southern Red Sea on Monday due to the disruptions, increasing the cost of shipping and the time it takes to move oil from one place to another.

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