Oil prices de­cline as Mid­dle East ten­sions fade

Muscat Daily - - BUSINESS -

Oil ended the first full week of 2020 with the steep­est loss since July as geopo­lit­i­cal threats to some of the world’s most im­por­tant sup­plies fiz­zled.

Fu­tures set­tled at a onemonth low in New York on Fri­day to cap a volatile week that saw crude soar and then crash as the US and Iran teetered on the brink of all-out con­flict. Ul­ti­mately, prices fin­ished the week down more than 6 per cent.

“Prices are still slid­ing be­cause of the eas­ing in ten­sions in the Mid­dle East,” said Michael Loewen, di­rec­tor of com­mod­ity

strat­egy at Sco­tia­bank. “That’s drain­ing the sup­ply risk pre­mium

that was in­jected into the mar­ket start­ing with the killing of the

Ira­nian gen­eral.”

Against the back­drop of wan­ing Mid­dle East ten­sions, US crude in­ven­to­ries ex­panded by 1.16mn bar­rels last week, con­found­ing an­a­lysts and traders who’d ex­pected a de­cline. With gaso­line stock­piles at a ten­month high, sup­ply con­cerns in the world’s big­gest econ­omy were as­suaged.

West Texas In­ter­me­di­ate crude for Fe­bru­ary de­liv­ery set­tled down 52 cents to US$59.04 a barrel on the New York Mer­can­tile Ex­change. Brent fu­tures for March set­tle­ment de­clined 39 cents to US$64.98 on the ICE Fu­tures Europe ex­change. The global bench­mark lost more than 5 per cent last week.

In ad­di­tion to am­ple Amer­i­can sup­plies, mem­bers of the Or­ga­ni­za­tion of Petroleum Ex­port­ing Coun­tries are sit­ting on huge amounts of spare ca­pac­ity af­ter cut­ting pro­duc­tion for most of the past three years.

‘Al­though the threat of out­right war has re­ceded, the in­dus­try re­mains on edge, ex­pect­ing dis­rup­tions like ship­ping in­ci­dents or at­tacks on oil fa­cil­i­ties on par with events last year,’ Eura­sia Group an­a­lysts Robert John­ston and Hen­ning Gloys­tein said in a note.

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