An aerial view shows a crude oil tanker at an oil terminal off Waidiao island in Zhoushan, Zhejiang province, China January 4, 2023. China Daily via REUTERS/File Photo
On Tuesday, oil prices experienced a decline as market participants assessed disruptions in U.S. production and geopolitical tensions in the Middle East and Europe, juxtaposed with an increase in crude supply from Libya and Norway.
Brent crude futures recorded a decrease of 71 cents, equivalent to 0.8%, settling at $79.35 per barrel by 12:53 p.m. EST (1753 GMT). Simultaneously, U.S. West Texas Intermediate crude futures (WTI) saw a reduction of 55 cents, or 0.7%, reaching $74.51 per barrel.
The oil futures market displayed volatility due to ongoing uncertainty surrounding various supply and demand indicators. Craig Erlam, an analyst at OANDA, highlighted the complex considerations that traders face, including economic prospects, interest rates, OPEC+ dynamics, and the potential for supply disruptions linked to events in the Red Sea.
Oil prices had experienced a 2% increase on Monday, prompted by concerns about supply following a Ukrainian drone strike on Novatek’s Ust-Luga Baltic fuel export terminal near St Petersburg, Russia. Meanwhile, tensions escalated in the Middle East as U.S. and British forces conducted a second joint round of strikes on Houthi positions in Yemen.
Bob Yawger, Director of Energy Futures at Mizuho Bank, noted that while geopolitical pressures weren’t sufficient to trigger a substantial rally in the oil market, they were substantial enough to prevent a significant downturn.
Supply constraints in the U.S. contributed to preventing sharper declines in oil prices. Over 20% of North Dakota’s oil output remained offline due to severe weather conditions and operational challenges, as reported by the state’s pipeline authority. Potential weather-induced shutdowns could impact crude inventories, with the American Petroleum Institute (API) expected to report a decline of around 3 million barrels for the week ending January 19, according to a Reuters poll.
However, upward pressure on prices was countered by increased production in other regions. Norway reported a rise in crude production to 1.85 million barrels per day (bpd) in December, exceeding analysts’ expectations and up from the previous month’s 1.81 million bpd. Additionally, Libya’s Sharara oilfield, with a production capacity of 300,000 bpd, resumed operations on January 21 after the resolution of protests that had halted output earlier in the month.
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