Crude oil prices have continued their weak sentiment into the new year driven by the slowing oil demand, the oversupplied conditions, and the growing inventories, despite concerns for any potential supply disruption from the Middle East.
Both Brent and WTI crude oil prices kicked off the fresh trading week by posting another 1% loss to $77/b and $72/b respectively, reacting to the news that Saudi Arabia, the world's largest crude oil exporter, reduced its official selling prices by $2/b across all regions.
Brent crude oil, Daily chart
The current weakness in the global crude oil market fundamentals has been indicated by the move of state-owned Saudi Aramco to cut the price of its Arab Light crude to Asia by $2/b, sending Brent's price below the $78/b mark.
Energy investors have put geopolitical concerns in the Middle East on the sideline. They are focusing more on the slowing global fuel demand growth, particularly from the struggling economies of China and the Eurozone, and the increasing output from some non-OPEC+ countries such as the USA, Canada, and Guyana.
The ongoing tensions between Hamas-Israel, Ukraine-Russia, and the Red Sea crisis have failed to support the falling oil prices as the regional military conflicts haven’t yet impacted the supply-demand dynamics that determine global oil prices.
Adding to the downward oil price momentum, Iran-backed Yemen Houthi’s missile attacks that have disrupted shipping in the Red Sea and some output shutdowns in Libya due to protests have been overshadowed by a huge U.S. fuel inventory buildup according to data from the Energy Information Agency.
Last Wednesday, local protests forced a full production shutdown at Libya’s Sharara oilfield, which can produce up to 300,000 barrels per day. The field, one of Libya’s largest, has been a frequent target for local and broader political protests.
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