Oil Prices Slide on Global Demand Worries

February 21, 2024
oil prices fall

By Adedapo Adesanya

Oil prices settled lower on Tuesday, with worries about global demand offsetting price support from the Israel-Hamas conflict, causing the Brent futures to lose $1.22 or 1.5 per cent to sell at $82.34 a barrel, as the US West Texas Intermediate (WTI) crude shed $1.30 or 1.4 per cent to trade at $77.04 a barrel.

The crude oil market was lower following the quiet trading over the Presidents’ Day holiday in the US and as demand concerns offset ongoing Middle Eastern geopolitical tensions.

Shipping has been impacted by escalating attacks on shipping lanes in the Red Sea and Bab al-Mandab Strait by Iran-aligned Houthis.

Four vessels have been targeted by drone and missile strikes since Friday but while oil prices have so far refrained from responding significantly to attacks on vessels in the Red Sea by the group, insurers have responded by raising day rates.

Rates for very large crude carriers (VLCCs) transporting oil from the Middle East to China have risen to a three-month high of $66,600 per day.

Since the first half of December, the number of crude oil tankers traversing the Red Sea has dropped by up to 60 per cent which the group is in support of Palestinians.

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” in the southern region of the Palestinian enclave where more than 1 million people are sheltering.

Despite the conflict in the Middle East, one of the world’s major oil-producing regions, investors appear more worried about flagging global demand.

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 the outlook from the Organisation of the Petroleum Exporting Countries (OPEC).

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

This is not the only contradiction between both institutions as both also disagree about the shift to renewable and cleaner energy.

The IEA, which represents industrialized countries, predicts oil demand will peak by 2030 while OPEC expects oil use to keep rising for the next two decades.

Adedapo Adesanya

Adedapo Adesanya is a journalist, polymath, and connoisseur of everything art. When he is not writing, he has his nose buried in one of the many books or articles he has bookmarked or simply listening to good music with a bottle of beer or wine. He supports the greatest club in the world, Manchester United F.C.

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