Oil gains marginally as demand jitters counter Middle East crisis
NEW YORK — Brent crude oil prices settled slightly higher in an abbreviated session on Monday, as lingering supply concerns from tensions in the Middle East were offset by signs of weakening demand.
Oil markets saw thinner volumes than usual due to the Presidents’ Day holiday in the US, UBS analyst Giovanni Staunovo noted. Brent futures also settled earlier than usual because of the holiday.
Brent futures gained nine cents to settle at $83.56 a barrel. US West Texas Intermediate (WTI) crude for March delivery, which will not have a settlement today and expires on Tuesday, rose 30 cents to $79.49 a barrel by 1:43 p.m. ET (1843 GMT).
The WTI contract for April delivery was down 11 cents to $78.35 a barrel.
Both Brent and WTI futures last week gained about 1.5% and 3%, respectively, reflecting the increasing risk of the Middle East conflict widening.
The conflict in the Middle East continued over the weekend as Israeli raids put the Gaza Strip’s second-largest hospital out of service.
On Saturday Yemen’s Iran-aligned Houthi fighters claimed responsibility for an attack on an India-bound oil tanker.
The US has proposed the United Nations Security Council oppose Israel’s Rafah assault and back a temporary Gaza ceasefire, according to draft text seen by Reuters.
Capping oil’s gains were slowing demand forecasts from the International Energy Agency and a bigger than expected increase to US producer prices in January, amplifying inflation concerns and lifting the dollar.
The dollar index which tracks the currency against six peers, has gained for five straight weeks and edged slightly higher on Monday. A stronger greenback makes dollar-denominated oil less attractive to investors holding other currencies, denting demand.
“Oil has been quite choppy in recent weeks, partly because of the dollar strength,” said Fawad Razaqzada, market analyst at City Index.
“The impact of the dollar has been offsetting supportive measures such as the Middle East situation, OPEC’s ongoing intervention and hopes economic conditions in China will improve in the coming quarters,” Mr. Razaqzada said.
Demand jitters were magnified on Friday when US Federal Reserve policy makers signaled the need for “patience” over-expectations of cuts to interest rates.
Markets are also awaiting indications of the direction of demand from China after it returns from a week-long Lunar New Year holiday.