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Crude oil futures fell more than 1% Tuesday as U.S. markets reopened following the holiday weekend, as concerns over global demand offset price support from ongoing geopolitical tensions in the Middle East.
Drone and missile strikes in the Red Sea have hit at least four vessels since Friday, and Houthi terrorists attacked a cargo vessel in the Gulf of Aden and said the vessel was at risk of sinking; The U.S. vetoed a draft United Nations Security Council resolution on the Israel-Hamas war, blocking a demand for an immediate ceasefire, ahead of Israel’s planned assault on the southern Gaza city of Rafah.
Despite the Middle East turmoil, investors appear more concerned about lackluster global demand, as China made its largest ever cut to mortgage rates in an attempt to boost the country’s struggling property sector.
“The fact that the crude market hasn’t responded more positively shows you the depths of the oil demand problems in China,” Again Capital’s John Kilduff said.
U.S. Nymex WTI crude (CL1:COM) for March delivery, which is expiring, settled -1.3% to $78.18/bbl, while the more actively traded April contract ended -1.4% to $77.04/bbl; the price difference between monthly contracts has been widening, Bloomberg reported, indicating a more robust outlook in parts of the physical market.
Meanwhile, front-month April Brent crude (CO1:COM) closed -1.4% to $82.34/bbl.
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“As oil supply and demand trends begin to stabilize, we expect ample stocks across the board to cap pricing with $80 WTI and $85 Brent likely providing a price peak that could set the stage for a price downswing for $72 WTI with Brent maintaining about a $5.25 premium,” Ritterbusch & Associates said in a report.