Oil Prices Steady Amidst Middle East Crisis and OPEC Supply Debate
Oil Prices Stabilize After Previous Day’s Decline
Oil prices steadied in early trade on Tuesday after sliding in the previous session, as markets weighed Middle East tensions against demand worries and rising OPEC supply.
Market Response to Oil Futures
Futures rose 18 cents, or 0.2%, to $76.30 a barrel at 0122 GMT, while U.S. West Texas Intermediate crude futures inched up 6 cents, or 0.1%, to $70.83 a barrel.
Factors Contributing to Monday’s Price Drops
The benchmarks had fallen over 3% and 4% respectively on Monday on sharp price cuts by top exporter Saudi Arabia and a rise in OPEC output.
Concerns About the Gaza War
However, concerns persist about the Gaza war. The Israeli military has said its fight against Hamas will rage through 2024, worrying markets that the conflict could grow into a regional crisis that could disrupt Middle Eastern oil supplies.
Secretary of State Blinken’s Arrival in Tel Aviv
U.S. Secretary of State Antony Blinken arrived in Tel Aviv late on Monday to brief Israeli officials on his two days of talks with Arab leaders on ending the war.
Impact of OPEC Oil Output
Holding back price gains however, a Reuters survey on Friday found that OPEC oil output rose in December as increases in Angola, Iraq and Nigeria offset continuing cuts by Saudi Arabia and other members of the wider OPEC+ alliance.
Saudi Arabia’s Response to Higher Supply
Higher supply has also prompted Saudi Arabia to cut the February official selling price of its flagship Arab Light crude to Asia to the lowest level in 27 months.
Dollar’s Influence on Oil Prices
Supporting prices, the dollar paused its rally on Tuesday, as traders reaffirmed their bets for a slew of Federal Reserve rate cuts this year. A weaker dollar boosts oil prices as crude becomes cheaper for holders of other currencies.
U.S. Monetary Policy and Interest Rates
Federal Reserve Governor Michelle Bowman on Monday said she now sees U.S. monetary policy as “sufficiently restrictive” and signalled her willingness to support eventual interest-rate cuts as inflation eases.
Awaiting U.S. Inventory Data
The market is awaiting U.S. inventory data from the American Petroleum Institute industry group later in the day.
