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Business News/ Markets / Commodities/  Oil pares gains as traders assess mixed signals on supply after IEA, OPEC revisions; Brent back to $79/bbl

Oil pares gains as traders assess mixed signals on supply after IEA, OPEC revisions; Brent back to $79/bbl

  • Brent slipped back below $80 a barrel after settling above the threshold on Monday for the first time since December 26.

FILE PHOTO: A view shows oil pump jacks outside Almetyevsk in the Republic of Tatarstan, Russia. REUTERS/Alexander Manzyuk/File Photo

Oil prices fell on Tuesday, January 23, paring some of the previous day's gains, as traders weighed rising crude supply in Libya and Norway against production outages in the United States and geopolitical tensions. Oil futures remain volatile as uncertainty persists around several supply and demand indicators.

Brent crude futures were down 58 cents, or 0.72 per cent, to $79.48 a barrel. US West Texas Intermediate crude futures (WTI) were down 45 cents, or 0.6 per cent, to $74.31 a barrel. Brent slipped back below $80 a barrel after settling above the threshold on Monday for the first time since December 26.

Also Read: India's crude oil output down 1.03% to 2.5 MMT in December, imports rise 1.1% YoY: PPAC

Back home, on the Multi Commodity Exchange (MCX), crude oil futures due for a February 16 expiry, was last trading 0.06 per cent lower at 6,261 per bbl, having swung between 6,118 and 6,265 per bbl during the session, against a previous close of 6,265 per barrel.

The International Energy Agency (IEA) this week raised its 2024 global demand forecast, but its projection is half that of producer group Organisation of Petroleum Exporting Countries (OPEC). The Paris-based agency also said that - barring significant disruptions to flows - the market looked reasonably well supplied in 2024.

Last week, OPEC said in its monthly report that it expects a demand growth of 2.25 million bpd this year, unchanged from its forecast in December. The producer group also said oil demand is expected to rise by a robust 1.85 million bpd in 2025 to 106.21 million bpd.

What's weighing on crude oil prices?

-Crude prices rose by around two per cent on Monday after a Ukrainian drone strike on Novatek's Ust-Luga Baltic fuel export terminal near Russia's second city St Petersburg raised supply concerns. The drone attack was a timely reminder that a bigger, more influential war is still raging on, according to analysts.

-Tensions also rose in the Middle East, where US and British forces carried out a second joint round of strikes on Houthi positions in Yemen on Monday night. Norway's crude production rose to 1.85 million barrels per day (bpd) in December, up from 1.81 million bpd the previous month.

-In Libya, production at the 300,000 bpd Sharara oilfield restarted on January 21 after the end of protests that had halted output since early this month. However, supply remains constrained in the US.

Also Read: ‘Oil markets well supplied’, says IEA as it raises 2024 global demand forecast; projects lower than OPEC

Where are prices headed?

Crude oil prices experienced a significant two per cent surge in international markets due to supply disruptions from both Russia and the United States, said analysts. Ukrainian drone strikes on Russia's Novatek fuel terminal further contributed to the increase in oil prices on the global stage.

Also, severe cold weather conditions in North Dakota, United States, are adversely affecting oil production, providing further support to prices. Geopolitical tensions in the Middle East are also contributing to the upward trend in crude oil prices.

Despite the positive factors, the strength of the dollar index and the absence of stimulus support from the People's Bank of China (PBOC) may impose limitations on the potential gains for crude oil. Anticipating continued volatility, we observe that crude oil has a support level at $74.10–73.50, with resistance set at $75.15-75.80 for the current session. In terms of INR, crude oil finds support at 6,205-6,130, while facing resistance at 6,350-6,420,'' said Rahul Kalantri, VP Commodities, Mehta Equities Ltd.

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