Oil prices experienced a decline on Tuesday, relinquishing some of the gains from the previous day, as traders grappled with conflicting indicators of rising crude supply in Libya and Norway against geopolitical tensions and production disruptions in the United States.
Brent crude futures slipped by 0.74%, or 59 cents, settling at $79.47 a barrel at 1240 GMT. Similarly, U.S. West Texas Intermediate crude futures (WTI) were down 0.72%, or 54 cents, closing at $74.22 a barrel. The retreat came after Brent had crossed the $80-per-barrel mark on Monday, marking the first time since December 26.
The oil market’s volatility persists due to uncertainty surrounding various supply and demand factors. OANDA analyst Craig Erlam highlighted that traders are navigating economic prospects, interest rates, OPEC+ dynamics, and the potential for supply disruptions, such as those in the Red Sea. However, clarity on these factors remains elusive.
Crude prices surged by approximately 2% on Monday following a Ukrainian drone strike on Novatek’s Ust-Luga Baltic fuel export terminal near St. Petersburg, Russia. The incident raised concerns about supply disruptions. PVM analyst John Evans characterized the drone attack as a “timely reminder” of a broader and more influential conflict still ongoing.
Geopolitical tensions escalated in the Middle East as U.S. and British forces conducted a second round of joint strikes on Houthi positions in Yemen on Monday night, adding another layer of uncertainty to global oil markets.
Supply dynamics also played a role in the market’s fluctuation. Norway reported a rise in crude production to 1.85 million barrels per day (bpd) in December, surpassing analysts’ expectations of 1.81 million bpd. In Libya, production at the Sharara oilfield resumed on January 21 after protests disrupted output earlier in the month.
However, the United States faced supply constraints, with about 20% of North Dakota’s oil output still offline on Monday due to weather-induced shutdowns, according to the state’s pipeline authority. PVM’s Evans suggested that these weather-related disruptions could lead to a decline in crude inventories in Tuesday’s American Petroleum Institute (API) weekly report.
As the global oil market navigates through a complex web of supply dynamics, geopolitical uncertainties, and weather-related disruptions, traders and analysts remain vigilant for signals that could influence the trajectory of oil prices in the coming days.