Oil rises as geopolitics counter demand concerns

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Posted By Jessica Weisman-Pitts

Posted on January 22, 2024

Oil rises as geopolitics counter demand concerns

By Natalie Grover

LONDON (Reuters) -Oil prices rose on Monday as traders weighed the impact of wars in the Middle East and Ukraine on oil supply against economic headwinds dampening global oil demand.

Brent crude rose 90 cents to $79.46 a barrel by 1450 GMT.

The front-month U.S. West Texas Intermediate crude futures contract for February delivery was up $1.10 at $74.42 a barrel in tepid trade, with the contract set to expire on Monday. The more active March WTI contract was up 91 cents at $74.16.

“While oil prices have firmed up a little, it is strange that they have not risen further, given the rising geopolitical tensions in the Middle East,” said Gary Dugan, chief investment officer at Dalma Capital.

“Part of the reason why oil prices have remained in check could be the market’s anticipation that global growth is slowing.

There are no signs of respite in Israel’s offensive in Gaza while attacks by Iran-aligned Houthis on commercial vessels in the Red Sea have continued despite retaliatory measures from the United States.

Meanwhile, Russian energy company Novatek has been forced to suspend some operations at its Baltic Sea fuel export terminal because of a fire, it said on Sunday, which Ukrainian media said was caused by a drone attack. The fire has been extinguished, local authorities said on Monday.

Oil fundamentals could continue to drag on prices, according to IG analyst Tony Sycamore.

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

“Investors want to be bullish, but tepid data and a cautious narrative from policymakers keep them on the back foot,” said Tamas Varga of oil broker PVM.

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 1.24 million and 2.25 million barrels per day, though all three organisations expect demand growth to slow in 2025. [EIA/M] [IEA/M] [OPEC/M]

Separately, production at Libya’s Sharara oilfield resumed on Sunday, state oil company NOC said, after protesters ended a sit-in that had halted output since early January.

(Reporting by Natalie Grover, Noah Browning, Mohi Narayan and Florence TanEditing by David Goodman and Jane Merriman)

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