Houston (Reuters)
Oil prices settled higher on Tuesday, driven by concerns over limited supply from Russia and Iran due to Western sanctions and expected higher Chinese demand.
Brent Crude and WTI Price Settlement
- Brent crude futures settled at $77.05 a barrel, up 75 cents or 0.98%.
- U.S. West Texas Intermediate (WTI) crude finished at $74.25 a barrel, up 69 cents or 0.94%.
Market Analysis and Expert Insights
According to Forex market analyst Razan Hilal, traders were looking to the Chinese stimulus plans to drive growth as supplies are tight following the Christmas and New Year’s holidays.
"While the market is currently range-bound, it is recording gains on the back of improved demand expectations fueled by holiday traffic and China’s economic pledges," said Hilal in a morning note. "However, the primary trend remains bearish."
UBS analyst Giovanni Staunovo noted that some market participants have apparently started to price in small supply disruption risks on Iranian crude exports to China.
"Concern over sanctions tightening supply has translated into increased demand for Middle Eastern oil, reflected in a rise in Saudi Arabia’s February oil prices to Asia, the first such increase in three months," said Staunovo.
Chinese Port Ban and Oil Trade Restrictions
On Monday, in China, Shandong Port Group issued a notice banning U.S.-sanctioned oil vessels from its network of ports. This move has potentially restricted blacklisted vessels from major energy terminals on China’s east coast.
Shandong Port Group oversees large ports on China’s east coast, including Qingdao, Rizhao, and Yantai, which are major terminals for importing sanctioned oil.
Global Economic Data and Market Impact
Meanwhile, cold weather in the U.S. and Europe boosted heating oil demand. However, oil price gains were capped by global economic data.
Euro zone inflation accelerated in December, an expected blip that is unlikely to derail further interest rate cuts from the European Central Bank.
"Higher inflation in Germany raised suggestions the ECB may not be able to cut rates as fast as hoped across the euro zone," said Panmure Liberum analyst Ashley Kelty.
Technical Indicators and Market Sentiment
Technical indicators for oil futures are now in overbought territory, and sellers are keen to step in again to take advantage of the strength, tempering additional price advances, said Harry Tchilinguirian, head of research at Onyx Capital Group.
Market participants await more economic data, including the U.S. December non-farm payrolls report on Friday.
"We have a very tight physical market and see demand exceeding supply," said Phil Flynn, senior analyst with the Price Futures Group. "That should lead to more drop downs of inventories around the globe."
Conclusion
Oil prices rose amid concerns over limited supply from Russia and Iran due to Western sanctions and expected higher Chinese demand. Market participants await more economic data, including the U.S. December non-farm payrolls report on Friday.
As the global economy continues to navigate challenges and changes in oil trade restrictions, it will be interesting to see how oil prices react to future market developments.
About the Author
Erwin Seba is a seasoned journalist with extensive experience covering the oil and gas industry. He has written for various publications and websites, providing insightful analysis and commentary on market trends and developments.
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