Oil Rallies as Middle East Tension Lingers
The oil market rallied on Tuesday following escalating tension in the Middle East following the deaths of three US soldiers in Jordan, while economic concerns in China limited the price upticks. Brent traded at $82.01 per barrel, an increase of 0.83% from the closing price of $81.33 a barrel in the previous trading session on Monday.
The American benchmark, West Texas Intermediate (WTI), traded at the same time at $77 per barrel, up 0.28% from Monday’s close of $76.78 per barrel. Prices started Tuesday on a bearish note as investors cashed out on higher prices on Monday.
Both benchmarks increased more than $1 a barrel on Monday over protracted tension in the Middle East after the deaths of three US service members while many were wounded during an unmanned aerial drone attack on US forces stationed in northeast Jordan over the weekend.
Brent softened yesterday and has been trading at around US$82 this Tuesday morning after hitting a recent peak of above US$84.5 as the focus shifts back to demand slowdown as Middle East uncertainty lingers.
China has been taking supportive measures to help the faltering economy. However, there are still no clear indications of a strong demand revival. Meanwhile, higher prices on account of geopolitical reasons could further weigh on oil demand in the medium term.
Saudi Aramco has decided to abandon its plans to boost oil production capacity from the current 12MMbbls/d to 13MMbbls/d as the demand outlook remains uncertain. Earlier in November, the company announced plans to boost oil production capacity to 13MMbbls/d by 2027, forecasting higher demand from Asian countries – especially from India and China.
Given the voluntary production cuts by Saudi Arabia to maintain market balance and softer prices, the additional capacity might have been considered unnecessary for now. Meanwhile, a recent survey from Bloomberg shows that Saudi Aramco might keep the official selling price of its Arab Light steady at US$1.5/bbl for its Asian customers for March sales.
Latest data from the US Energy Department shows that the Biden administration has purchased another 3.1MMbbl of oil for the Strategic Petroleum Reserve to be delivered in May 2024.
For the current year, the purchases totalled 6.3MMbbls, while the government has bought a total of 20.13MMbbls of oil for the SPR since the beginning of 2023. Recent market reports suggest that the capacity expansion for the Trans Mountain pipeline is once again delayed due to technical issues faced during the construction activities. Selloffs Provoke Spike in Nigerian Treasury Bills Yield
The planned expansion of 890Mbbl/d is expected to nearly triple the existing capacity of the pipeline. Earlier, the pipeline was scheduled to start operating, with the expanded capacity starting next month with its first cargo being shipped from Vancouver in April. #Oil Rallies as Middle East Tension Lingers
