Oil up as Middle East tensions persist, demand concerns cap gains

Geopolitical tensions in the Middle East continued to raise concerns, which led to an increase in oil prices on Tuesday. However, gains were constrained by negative demand sentiments and the market’s waiting for monthly reports from oil agencies.

By 0408 GMT, Brent futures for May delivery had increased by 26 cents, or 0.3%, to $82.47 per barrel. The April contract for US crude increased by 17 cents, or 0.2%, to $78.10 a barrel.

Although there haven’t been any major interruptions to the oil supply as a result of the conflict between Israel and the Palestinian organisation Hamas, Yemen’s Houthis, who are affiliated with Iran, have been assaulting ships in the Red Sea and Gulf of Aden since November in what they claim is a campaign of sympathy with Palestinians.

Western Yemeni port cities and small villages were struck by airstrikes purportedly carried out by a US-British coalition on Monday. Meanwhile, the Houthis said on Tuesday that they had fired missiles at what they claimed as the “US ship Pinocchio” in the Red Sea.

The prognosis for declining demand and rising supply from suppliers outside the Organisation of Petroleum Exporting Countries (OPEC) will, however, limit gains.

“Bearish demand sentiments and growing non-OPEC supply leave little room for the market to be bullish on oil prices at this time,” said Serena Huang, head of APAC analysis at Vortexa.

The International Energy Agency (IEA) expects oil supply to grow to a record high of about 103.8 million bpd, almost entirely driven by producers outside OPEC and its allies (OPEC+), including the United States, Brazil and Guyana.

Meanwhile, China’s crude oil imports rose in the first two months of the year versus the same period in 2023, but they were weaker than the preceding months, continuing a trend of softening purchases by the world’s biggest buyer.

In the meantime, the market is awaiting demand estimates from monthly reports by OPEC, the IEA and the Energy Information Administration, analysts from ANZ said in a note.

“While we believe the estimates will be largely unchanged, any upside surprise will ease demand concerns.”

Similar Posts

Leave a Reply

Your email address will not be published. Required fields are marked *