Oil prices dropped in Asian trade on Monday, reversed some of the previous week’s gains due to concerns about slowing demand. In the upcoming months, as well as the expectation of multiple significant economic events that kept markets nervous.
U.S. Cold Snap and Inventory Surges: Factors Suppressing Oil Prices
The United States experienced extreme cold that led to more disruptions and restricted travel in many areas. Suggesting a decline in demand for fuel in the largest fuel consumer in the world. The idea was further complicated by a run of weekly increases in the United States oil product inventories.
Any significant increases in oil prices this year have been thwarted by worries about a short-term slowdown in demand, with indications of a sluggish economic recovery in China being a major source of contention. The largest oil importer in the world experienced a lacklustre fourth-quarter expansion.
Fears about demand caused traders to overlook potential disruptions in Russian fuel exports. A major fuel export terminal in the Baltic Sea has suspended some operations due to an alleged drone attack by Ukraine, according to energy firm Novatek, as reported by Reuters.
By 20:10 ET (01:10 GMT), West Texas Intermediate crude futures dropped 0.3% to $73.04 a barrel. While Brent oil futures expiring in March dropped 0.5% to $78.21 a barrel.
Despite posting modest gains this past week. Both contracts have so far in 2024 been relatively quiet following over 10% declines in 2023.
Fears of Middle East supply disruptions had not helped oil prices much. Despite the fact that the Israel-Hamas conflict was intensifying and seemed to be spreading to other areas of the region.
But the region’s oil supplies had not yet been significantly impacted by the conflict.
Because of the record-high the United States output and the Organisation of Petroleum Exporting Countries’ restricted output cuts. Oil markets are predicted to stay well-supplied in the first half of 2024.
Market Outlook and Influencing Factors: Central Bank Meetings and Economic Reports Awaited
In order to get additional clues, traders were now awaiting a number of significant central bank meetings and economic reports in the upcoming weeks.
It is generally anticipated that the Bank of Japan will stick to its extremely dovish stance when it meets on Tuesday. Analysts, however, cautioned against taking any hawkish surprises from the the Bank of Japan. Particularly if it altered its yield curve control measures.
At its meeting later this week, the European Central Bank is expected to restate its earlier assessment of higher interest rates in the near future, which is not good news for the bloc’s economy. The largest economies in the euro zone are already experiencing a recession due to slowing economic growth.
Later this week, the United States will also release its fourth quarter GDP data. Which will be closely watched for clues about the country’s status as the world’s biggest fuel consumer.
The Federal Reserve has more leeway to keep interest rates higher for longer due to the strength of the United States economy. Which is expected to have an adverse effect on economic activity and oil demand in 2024.