Global oil prices witnessed a significant surge on Tuesday, propelled by a convergence of factors including escalating tensions in the Middle East and indications of recovering demand in China.
Brent crude, a pivotal benchmark in the oil market, is presently trading at $82.84 per barrel, reflecting a 0.23% increase for the day. Similarly, West Texas Intermediate crude (WTI) climbed to $78.35 per barrel, marking a rise of 0.27%.
Analysts point to a blend of geopolitical unrest and positive economic signals as drivers of this upward trajectory.
Tony Sycamore, an analyst at IG Market, highlighted that despite subdued trading during the Presidents’ Day holiday in the U.S., crude markets experienced marginal declines amid demand concerns, although ongoing tensions in the Middle East provided some support.
In the Middle East, the Iran-aligned Houthis have persisted in their attacks on shipping lanes in the Red Sea and Bab al-Mandab Strait. Since Friday, at least four vessels have been targeted by drone and missile strikes, heightening apprehensions about disruptions to global oil supplies.
Furthermore, China’s robust economic performance has bolstered the surge in oil prices. Analysts at ANZ underscored signs of increased demand in the country, particularly evident during the national Lunar New Year holiday. Tourism revenues during this period surged by 47.3% year-on-year, surpassing pre-COVID levels. Additionally, China’s decision to lower a benchmark reference rate for mortgages surpassed expectations, aiming to stabilize its property market and fortify the economy.
Despite these positive indicators, concerns persist regarding the long-term trajectory of oil demand. The International Energy Agency (IEA) issued a bearish report last week, downwardly revising its 2024 oil demand growth forecast. The report cited expectations of renewable energy sources increasingly displacing fossil fuels, potentially tempering future demand for oil.
As geopolitical tensions simmer in the Middle East and economic recoveries unfold unevenly across the globe, the oil market remains poised for further fluctuations, with investors closely monitoring developments for their potential impact on supply and demand dynamics.
