Crude oil prices settle lower on demand worries

OIL PRICES settled lower on Tuesday, with worries about global demand offsetting price support from the Israel-Hamas conflict.

Brent futures settled down $1.22, or 1.5%, to $82.34 a barrel. The six-month spread for Brent on Tuesday was at its highest since October, a sign of a tighter market.

US West Texas Intermediate (WTI) crude for March delivery, which expires Tuesday, settled down $1.01 or 1.3% to $78.18 a barrel. The more actively traded April WTI contract settled down $1.30 or 1.4% to $77.04 a barrel.

There was no settlement for WTI on Monday due to a US public holiday.

The premium for prompt US crude futures to the second-month contract more than doubled, hitting a high of $1.71 a barrel — its widest in roughly four months. This encourages energy companies to sell now rather than paying to store product for future months.

Crude markets were “marginally lower” in “quiet trading over the Presidents’ Day holiday in the US and as demand concerns offset ongoing Middle Eastern geopolitical tensions,” IG market analyst Tony Sycamore said in a note.

The US again vetoed a draft United Nations Security Council resolution on the Israel-Hamas war, blocking a demand for an immediate humanitarian ceasefire as it instead pushes the 15-member body to call for a temporary ceasefire linked to the release of hostages held by Hamas. The UN has warned an assault “could lead to a slaughter.” Shipping has suffered as Iranaligned Houthis, in support of Palestinians, have increased attacks on shipping lanes in the Red Sea and Bab al-Mandab Strait. Drone and missile strikes have hit at least four vessels since Friday.

An International Energy Agency (IEA) report last week revised the 2024 oil demand growth forecast downward, to almost a million barrels a day less than producer group Organization of the Petroleum Exporting Countries’ (OPEC) outlook.

The IEA estimated global oil demand will grow by 1.22 million barrels per day (bpd) this year. OPEC’s growth forecast is 2.25 million bpd.

US oil refiners are running at weak levels due to seasonal maintenance and unplanned outages.

US crude inventories were seen up last week, a preliminary Reuters poll showed, while the rate of refinery utilization was expected to increase 1.1 percentage point from 80.6% of total capacity in the previous week.