Global oil prices exhibited volatility on Wednesday, fluctuating between modest declines and gains as traders assessed the impact of escalating geopolitical tensions, concerns over subdued demand, and a strengthening U.S. dollar.
At 0712 GMT, the front-month March contract for Brent crude increased by 4 cents to $79.59 a barrel, while U.S. West Texas Intermediate crude also saw a marginal uptick of 4 cents to $74.41 a barrel.
In the week ending January 19, U.S. crude stocks reportedly fell by 6.67 million barrels, according to sources citing American Petroleum Institute figures on Tuesday. However, gasoline inventories increased by 7.2 million barrels, raising apprehensions about fuel demand in the world’s leading oil consumer.
The Energy Information Administration (EIA), the statistical arm of the U.S. Department of Energy, is set to release its data later on Wednesday.
The strength of the U.S. dollar also exerted pressure on oil prices, as buyers in other currencies faced increased costs for dollar-denominated oil.
The dollar index hovered near a six-week high against major peers on Wednesday, reflecting investor expectations that the Federal Reserve would not rush to cut interest rates in light of a resilient U.S. economy.
Vikas Dwivedi, Global Energy Strategist at Macquarie, noted, “Without current geopolitical tensions, we believe crude would sell off meaningfully. Over time, we expect supply risk premiums to decouple from conflict risk.”
Dwivedi added that, barring an escalation in the Middle East, crude prices are anticipated to stay within the current range for the first quarter of 2024, with no anticipated supply loss.
Geopolitical tensions include a coalition of 24 nations, led by the U.S. and the UK, conducting strikes against Houthi fighters in Yemen to halt attacks on global trade. Additionally, the U.S