Oil Prices Decline as Demand Optimism Fades Amid Supply Concerns

Oil prices extended their losses for a second consecutive session on Tuesday as optimism over global demand faded. Brent crude futures dipped by 0.2% to $76.08 per barrel, while U.S. West Texas Intermediate (WTI) crude slipped 0.3% to $73.31 per barrel as of 0804 GMT. This decline follows a drop on Monday, reversing last week’s rally when both benchmarks reached their highest levels since October on expectations of fiscal stimulus to bolster China’s struggling economy.

Weak demand from China and rising non-OPEC supply have further pressured oil prices, with market analysts predicting ample global supply throughout the year. Investors are now looking ahead to key data releases, including the U.S. December nonfarm payrolls report, for indications of future demand trends and Federal Reserve interest rate policy. According to ING analysts, crude’s upward momentum appears to be waning, as fundamentals suggest a comfortable supply outlook through 2025, potentially capping any significant price gains.

Nonetheless, concerns over reduced Russian and Iranian supply due to widening Western sanctions have limited the decline in oil prices. This uncertainty has fueled stronger demand for Middle Eastern crude, prompting Saudi Arabia to raise its official selling prices for February shipments to Asia—the first such increase in three months. Additionally, data from the U.S. Commodity Futures Trading Commission showed that money managers have raised their net long positions in U.S. crude futures and options, signaling cautious optimism despite current market challenges.