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Oil settles little changed; demand concerns offset Middle East tensions

Published 12/02/2024, 01:20 pm
© Reuters. FILE PHOTO: Storage tanks are seen at the Petroineos Ineos petrol refinery in Lavera, France, March 29, 2022. Picture taken March 29, 2022. REUTERS/Benoit Tessier/File Photo
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By Scott DiSavino

NEW YORK (Reuters) -Oil futures settled little changed on Monday as concerns about interest rates and global demand caused the market to take a break after prices jumped about 6% last week on worries Middle East tensions could cause supply problems.

Brent futures fell 19 cents, or 0.2%, to settle at $82.00 a barrel. U.S. West Texas Intermediate (WTI) crude rose 8 cents, or 0.1%, to settle at $76.92.

That was the highest close for WTI since Jan. 30 for a third day in a row and put the contract up for a sixth straight day for the first time since September.

The New York Fed said its January Survey of Consumer Expectations showed the outlook for inflation a year and five years from now were unchanged, with both remaining above the Fed's 2% target rate.

If inflation worries delay Fed interest rate cuts, that could reduce oil demand by slowing economic growth.

U.S. inflation data is expected on Tuesday, while British inflation and euro zone Gross Domestic Product (GDP) data should land on Wednesday.

The International Energy Agency (IEA), which represents industrialized countries, predicted oil demand will peak by 2030, undercutting the rationale for investment. Others in the market disagreed.

France's TotalEnergies CEO Patrick Pouyanne said he does not see peak oil demand in the numbers, adding "we should exit debate about peak oil demand, be serious, and invest."

The Organization of the Petroleum Exporting Countries (OPEC) believes oil use will keep rising over the next two decades.

SOARING PRICES LAST WEEK

Crude benchmarks rallied about 6% last week due to persistent threats to shipping in the Red Sea, Ukrainian strikes on Russian refineries and U.S. refinery maintenance.

U.S. gasoline futures edged up about 1% on Monday to a three-month high after soaring 9% last week during refinery downtime.

The Iran-backed Houthis in Yemen have targeted shipping with drones and missiles since November in solidarity with Palestinians in Gaza. The U.S. has led retaliatory strikes on Houthi missile sites since January.

"We will again note that global crude supply has yet to be significantly disrupted by the Mideast hostilities and that rerouted oil cargoes around the Red Sea have not significantly reduced global crude supply," analysts at energy advisory Ritterbusch and Associates said.

In Gaza, Israel freed two hostages held by Iran-backed Hamas in Rafah in a ferocious rescue operation that killed 74 Palestinians in the southern Gaza city where about one million civilians have sought refuge from months of bombardments.

Elsewhere in the Middle East, Saudi Arabia's energy minister said the reason behind the kingdom's recent decision to halt its oil capacity expansion plans was the energy transition, adding it has plenty of spare capacity to cushion the oil market.

© Reuters. FILE PHOTO: Storage tanks are seen at the Petroineos Ineos petrol refinery in Lavera, France, March 29, 2022. Picture taken March 29, 2022. REUTERS/Benoit Tessier/File Photo

Fellow OPEC member Iraq said it was committed to OPEC's decisions and after its second voluntary cut announced in December. Iraq also said it was committed to producing no more than 4 million barrels per day.

In the U.S., meanwhile, oil output in top shale-producing regions was on track to rise in March to a four-month high, according to a federal energy outlook.

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