Oil fell due to Saudi Arabia lowering official selling prices across the board, highlighting a deteriorating situation and outweighing worries about supply disruptions in Libya and tensions in the Red Sea.

After increasing 2.2% the previous week, global benchmark Brent dropped below $78 per barrel, with West Texas Intermediate trading at roughly $73. Due to the ongoing deterioration in the global crude market, state producer Saudi Aramco lowered its trademark Arab Light pricing to Asia by more than $2 per barrel, as predicted.

As a result of growing supplies from outside the OPEC+ cartel and worries that demand growth would slacken this year, particularly in top importer China, oil is experiencing its first yearly decrease since 2020. Wall Street anticipates greater difficulties for crude in 2024, even though big banks have already lowered their projections for the year.

Middle East tensions and supply interruptions are still a source of some support, according to Warren Patterson, ING Groep NV’s head of commodities strategy. “But given a fairly comfortable balance over the first half of 2024, we suspect the upside is limited in the absence of escalation in the Middle East.”

Following a series of attacks by Houthi rebels on vessels, the Middle Eastern container giant A.P. Moller-Maersk A/S will keep rerouting ships away from the Red Sea. Meanwhile, US Secretary of State Antony Blinken issued a warning that the fight between Israel and Hamas might escalate into a larger regional conflict.

Additionally, following protesters’ closure of the Sharara oil field, Libya’s National Oil Corporation announced a state of force majeure. Supplies to the Zawiya terminal were stopped due to the closure of the biggest field in the country, according to the NOC.

The differential between Brent’s two nearest contracts, a widely followed indicator of near-term circumstances, has recently shifted due to the tensions in the Middle East. A month ago, the difference was 16 cents in contango, the opposite structure, versus 22 cents a barrel in backwardation, a bullish pattern.

- Published By Team Nation Press News

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