Oil prices fell on Friday after recovering the previous day on concerns about geopolitical tensions, disruptions in US oil production due to cold weather, slow demand growth in China, and strong supply forecasts.
Brent crude futures were down 23 cents, or 0.3%, at $78.87 a barrel by 04:20 GMT. West Texas Intermediate (WTI) crude oil futures fell 7 cents to $74.01.
Both indicators, which gained about 2% on Thursday as the International Energy Agency (IEA) joined the producer group OPEC in forecasting strong growth in global oil demand, are on track to finish the week with a rise of around 1-2%.
The IEA on Thursday once again raised its 2024 global oil demand growth forecast, but its forecast fell short of OPEC’s expectations and said the market was well supplied due to strong growth outside the producer group.
The IEA expects the world oil supply to increase by 1.5 million barrels per day to a new high of 103.5 million barrels per day in 2024, driven by record production from the United States, Brazil, Guyana and Canada.
Pakistan launched an attack on separatist militants inside Iran on Thursday in retaliation, two days after Tehran said it had struck another group’s bases on Pakistani territory.
As tensions spread in the Middle East, traders are reluctant to take short positions but are also cautious about continuing to build long positions as China’s economic recovery remains slow.
Unless tensions in the Middle East escalate further, WTI will likely continue to trade in a range around $70-$76. As the US elections approach, the US-China conflict may come to the fore again and this is likely to be negative for energy demand.
Ship tracking data showed two oil tankers leaving the Red Sea turned around and passed through the Bab al-Mandeb Strait, but tensions in the region continued to disrupt global shipping and trade. According to Vortexa’s data, between January 13 and 17, tanker traffic in the Bab el-Mandab Strait decreased by 58% compared to the same period in 2023.
Houthi rebel attacks on US ships continued on Thursday, nearly a week after the US and UK launched an assault on their positions in Yemen.
Beyond the Middle East, the U.S. Energy Information Administration (EIA) on Thursday reported a larger-than-expected draw in crude inventories of 2.5 million barrels on strong demand from refineries in the week ended Jan. 12, but gasoline and distillate inventories rose to multi-year highs.
Meanwhile, about 40% of oil production in North Dakota, the largest U.S. oil-producing state, remains shut down due to extremely cold weather and operational difficulties, the state’s pipeline official said Wednesday.
