Brent crude futures dropped 2 cents to $80.04 a barrel, while U.S. WTI crude futures were 1 cent lower at $74.75 a barrel
Oil prices were little changed on Tuesday as traders weighed a number of conflicting supply and demand concerns, with rising tensions in the Middle East and cold weather woes disrupting production in the US.
Brent crude futures dropped 2 cents to $80.04 a barrel by 0353 GMT, while U.S. West Texas Intermediate (WTI) crude futures were 1 cent lower at $74.75 a barrel.
Both the contracts had settled nearly 2% higher on Monday, as a drone strike on Novatek’s Ust-Luga fuel export terminal raised supply concerns and drove up prices. Analysts say Novatek is likely to resume large-scale operations there within weeks.
While damage to loading berths at the Ust-Luga terminal only “briefly impacted exports,” the move raises the possibility of the Russia-Ukraine war “moving into a new phase where parties target key energy infrastructure,” ANZ Research analysts said in a note.
In the Middle East, attacks on vessels in and around the Red Sea region have disrupted global shipping and stoked fears of inflation.
Without any recession concerns, the impact of extreme weather on U.S. crude oil production and the escalation of geopolitical conflicts still support oil prices, said CMC Markets’ analyst Leon Li.
In the U.S., 20% of North Dakota’s oil output remained shut in because of extreme cold and operational challenges, the state’s pipeline authority said on Monday.
Weighing on markets, however, are concerns over China’s sputtering economic recovery, which is raising worries about global oil demand given the Asian giant is the world’s largest crude oil importer.
Chinese policymakers have rolled out a raft of measures to shore up the economy but domestic consumption remains weak, leaving oil traders on edge about demand prospects.
Given conflicting fundamental factors right now in West Texas Intermediate crude (market), the momentum factor is likely to be the main driver in setting the stage for oil prices in the short term, noted OANDA senior markets analyst Kelvin Wong.