Brent crude futures fell 82 cents, or 1.1 per cent, to $77.47 a barrel. US West Texas Intermediate crude futures (WTI) were down 51 cents, or 0.7 per cent, at $71.89, according to news agency StuffsEarth.
Back home, on the Multi Commodity Exchange (MCX), crude oil futures due for a January 19 expiry, was last trading 0.42 per cent lower at ₹5,978 per bbl, having swung between ₹5,868 and ₹6,017 per bbl during the session, against a previous close of ₹6,003 per barrel.
Also Read: OPEC Expects Global Oil Demand to Slow in 2025
What’s weighing on oil prices?
-Tensions remained high after the US mounted fresh strikes against Iran-aligned Houthi militants in Yemen on Tuesday after a Houthi missile hit a Greek vessel. Analysts say that oil prices may find a ceiling unless production is shut in.
-China’s economy in the fourth quarter expanded by 5.2 per cent annually, calling into question forecasts that Chinese demand will fuel 2024 global oil growth. Still, China’s oil refinery throughput in 2023 rose 9.3 per cent to a record high, indicating elevated demand.
-”The economic data does not end the headwinds over crude oil demand, the Chinese outlook for 2024 and 2025 is still bleak,” said Priyanka Sachdeva, senior market analyst at Phillip Nova. In the absence of actual impact on oil output, prices will remain well within the current $72-$82 range, said analysts.
-The Organisation of Petroleum Exporting Countries (OPEC) stuck to its forecast for relatively strong growth in global oil demand in 2024. OPEC said on Wednesday that 2025 will bring a “robust” increase in oil use, led by China and the Middle East.
-Meanwhile, the US dollar hovered near a one-month high after comments from Federal Reserve officials lowered expectations for aggressive interest rate cuts. A stronger dollar reduces demand for dollar-denominated oil from buyers using other currencies.
“Higher rates can lead to a weaker outlook for oil demand as economic activity tends to cool in a high interest rate environment, leaving oil prices vulnerable, according to analysts.
-Also in the US, oil refiners are expected to have 1.5 million barrels per day (bpd) of capacity offline for the week ending January 19, decreasing available refining capacity by 954,000 bpd, research company IIR Energy said on Wednesday.
Where are prices headed?
Crude oil experienced significant volatility before settling on a stable trajectory. The dollar index restricted the upward momentum of crude oil in the global markets. Milder weather conditions in the US during the latter half of January contributed to a decline in oil prices, as the potential for warmer weather could reduce the demand for heating oil.
The surge in US stocks over the past two weeks, driven by increased US production and decreased demand, exceeded expectations. Despite this, geopolitical tensions in the Red Sea and positive Chinese stimulus measures provided support to oil prices, according to analysts.
‘’Anticipating continued volatility, we project crude oil prices to fluctuate during today’s session. Support for crude oil is identified at $71.40–70.50, with resistance at $72.85-73.50 in today’s session. In terms of INR, crude oil has support at ₹5,920-5,840, while resistance is at ₹6,110-6,190,” said Rahul Kalantri, VP Commodities, Mehta Equities Ltd.
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Published: 17 Jan 2024, 10:47 PM IST
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