Brent declines on signs of lagging global demand
The front-month ICE Brent contract moved $1.25/bbl lower on the day, to trade at $76.84/bbl at 09.00 GMT.
PHOTO: An oil pump jack. Getty Images
Upward pressure:
The Israel-Hamas conflict might continue through 2024, as stated by the country's officials. This has led to discussions about a broader regional dispute that could threaten the global oil supply.
The situation in the Middle East remains tense as Israel stands firm on its commitment to a ground offensive in Gaza, despite Iran's warning of joining the conflict if attacks escalate.
Meanwhile, Lebanon-based militant group Hezbollah struck an air traffic control base in the northern part of Israel on Sunday and warned of “another war”, the Associated Press reported citing the Israeli military.
“The increase in fighting across the border with Lebanon as Israel battles Hamas militants in Gaza gave new urgency to U.S. diplomatic efforts as Secretary of State Antony Blinken prepared to visit Israel on his latest Mideast tour,” said Price Futures Group’s senior market analyst Phil Flynn.
Downward pressure:
The Brent futures' upward movement so far this week has been capped by indications of reduced global oil demand.
China’s state-owned refineries Sinopec and PetroChina reduced their refinery run rates in December 2023, on account of muted domestic fuel demand, market intelligence provider JLC reported.
China's role as a major player in the oil market means that any indication of weakened demand in the country directly impacts Brent's price.
Meanwhile, the decision by Saudi Aramco to reduce the official selling price (OSP) of its flagship Arab Light crude to Asia in February reflects the impact of weakened demand in the oil market
“Weak demand fundamentals influenced this [Aramco] decision in the global physical oil market,” said SPI Asset Management’s managing partner Stephen Innes. “While the price cuts were widely anticipated, they turned out to be larger than analysts had forecasted,” he further added.
By Aparupa Mazumder
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