Oil prices remained relatively unchanged in Asian trading on Tuesday as the market assessed a weak demand outlook against escalating geopolitical tensions in Russia and the Middle East, which could potentially disrupt supplies.
With U.S. markets closed for a holiday on Monday and a lack of significant market-moving news, there was minimal price action. Despite a strong rally in crude prices over the past two weeks, recent sessions have shown signs of stalling as traders turned increasingly pessimistic about demand prospects.
The outlook for demand was clouded by strong U.S. inflation data, which diminished expectations of early interest rate cuts by the Federal Reserve. Additionally, the International Energy Agency’s warning of slowing global crude demand and fourth-quarter recessions in the UK and Japan further dampened sentiment.
Brent oil futures for April delivery edged down 0.1% to $83.45 a barrel, while West Texas Intermediate crude futures slipped 0.2% to $78.34 a barrel, both hovering near three-week highs.
Despite concerns over demand, oil prices remained supported by ongoing supply disruptions in the Middle East. Clashes between Yemeni Houthis and U.S. forces, along with the Israel-Hamas conflict, added to these concerns. Additionally, tensions escalated in the Russia-Ukraine war as Moscow seized control of Avdiivka, raising fears of potential supply disruptions along the Black Sea.
While fears of supply disruptions have been a key driver of oil prices in recent weeks, they still trade below early-2022 highs. However, positive signs from China, such as travel spending surpassing pre-COVID levels during the Lunar New Year holiday, provided some support to demand outlook. Furthermore, China’s unexpected rate cut injected more liquidity into domestic markets, offering additional positive cues.