Oil prices fell by more than 1 per cent on early trade on Monday, with Brent Crude falling by 1.24 per cent or 0.95 cents to trade at $77.81 a barrel by 7:49 AM GMT.
U.S. West Texas Intermediate crude futures (WTI) also dropped by 1.33 per cent, or 0.97 cents, to $72.84 a barrel.
Sharp price cuts by Saudi Arabia, the world’s largest oil exporter, and an increase in the Organisation of the Petroleum Exporting Countries (OPEC+) production are two of the main factors for the drop in prices. Meanwhile, the geographical unrest in the Red Sea continues to raise concerns.
Saudi Arabia reduced the official selling price (OSP) of its flagship Arab Light crude to Asia for February to the lowest level in 27 months on Sunday due to increased supply and competition from rival producers.
“Saudi Aramco slashing its February OSPs bolsters the weak demand narrative,” Vandana Hari, Founder of Vanda Insights told Reuters.
“If we were just to focus on the fundamentals including, higher inventories, higher OPEC/non-OPEC production, and a lower-than-expected Saudi OSP, it would be impossible to be anything other than bearish crude oil,” Tony Sycamore, IG analyst said.
However, the first week of 2024 saw both contracts rise more than 2 per cent as investors got back from vacation and turned their attention to Middle East geopolitical risk in the wake of Houthi attacks on the Red Sea.
The geographical tension in the Red Sea continues to cause disturbances in the oil movement. While concerns about the Israeli war on Gaza could spread to a bigger regional conflict still looming around.
“The Red Sea tensions are the only counterweight, albeit a relatively weak and intermittent one, to crude prices succumbing to bearishness over expectations of softening global demand and rising inventories,” Hari added.
