The chimneys of the Total Grandpuits oil refinery are seen just after sunset, southeast of Paris, France, March 1, 2021. REUTERS/Christian Hartmann
SINGAPORE – Oil prices fell for a second day on Monday as economic headwinds pressured the global oil demand outlook and outweighed geopolitical concerns in the Middle East and an attack on a Russian fuel export terminal over the weekend.
Brent crude fell 41 cents, or 0.5 percent, to $78.15 a barrel by 0105 GMT after settling down 54 cents on Friday.
The front-month U.S. West Texas Intermediate crude futures, for February delivery, inched down 2 cents to $73.39 a barrel with the contract set to expire later on Monday. The more active March WTI contract was at $72.95 a barrel, down 30 cents.
“This morning’s subdued re-open speaks volumes about current sentiment in the crude oil market despite ongoing geopolitical tensions in Europe and the Middle East,” IG analyst Tony Sycamore said.
Prices barely budged despite an alleged Ukrainian drone attack at a huge Russian fuel export terminal. Russian producer Novatek said on Sunday it had been forced to suspend some operations at the Baltic Sea terminal because of a fire.
In the Middle East, the Gaza war rages on while the U.S. struck another anti-ship missile preparing to launch into the Gulf of Aden by Yemen’s Houthi militants on Saturday.
READ: Oil edges lower despite Middle East conflict
The attacks by the Iran-aligned group in the Red Sea and the Gulf of Aden have disrupted global trade. It has also tightened European and African crude markets and pushed the premium of the first-month Brent contract to the six-month contract to $1.99 on Friday, the widest since November. This structure, called backwardation, indicates a perception of tighter supply for prompt delivery.
IG’s Sycamore said oil fundamentals remain a headwind for prices.
Oil “production is higher and the growth outlook in China and Europe is mixed at best, while GDP data this week is expected to show the velocity of the U.S. economy has slowed considerably,” he added.
READ: Waning influence of OPEC+ in spotlight as prices flag
The latest demand growth forecasts by the U.S. Energy Information Administration, the International Energy Agency and the Organization of the Petroleum Exporting Countries for 2024 are in a wide range between 1.24 million and 2.25 million barrels per day although all the three organizations expect demand to decelerate in 2025.
The number of oil rigs operating in the U.S. fell by two to 497 last week, their lowest since mid November, Baker Hughes data showed on Friday.
“We assume that these losses were the rigs that were not able to safely re-activate due to cold weather conditions,” JP Morgan analysts said in a note.