quick look:
- Oil prices rose, with Brent crude futures rising by 0.9% to $79.38 per barrel, and West Texas Intermediate crude futures rising by 0.8% to $74.36 per barrel.
- Geopolitical tensions in the Middle East, including attacks by Yemen's Houthi movement, have disrupted shipping activities in the Red Sea.
- Russia reduced its gasoline and diesel exports to non-CIS countries by 37% and 23%, respectively, in January.
Oil prices have seen significant fluctuations this week, influenced by a complex web of geopolitical tensions, economic signals and production changes. Despite these challenges, oil prices rose, supported by a weak dollar ahead of the release of expected non-farm payrolls data, which may impact US interest rate expectations. However, volatility has characterized the week, with prices poised to close lower. Reports of a potential ceasefire between Israeli and Hamas leaders particularly weighed on this volatility, sending Brent crude futures up 0.9% to $79.38 per barrel. Furthermore, West Texas Intermediate crude futures rose 0.8% to $74.36 per barrel.
Three main factors are disrupting oil markets
Escalating tensions in the Middle East, particularly attacks by the Yemeni Houthi group allied with Iran on ships in the Red Sea, have exacerbated instability in the oil market and disrupted shipping activities. Retaliatory strikes by US-led forces against the Houthis and the subsequent avoidance of the Suez Canal by many shipping companies signaled potential delays in oil deliveries to Europe and Asia. On February 1, the Energy Ministry reported that Russia reduced its gasoline and diesel exports to non-CIS countries by 37% and 23%, respectively, in January year-on-year. This adjustment was made to offset the impact of unexpected maintenance activities at the refineries.
Economic weakness and production adjustments
The backdrop to oil price movements includes continued economic weakness in China and a recovery in US production. In addition, Russia has made significant adjustments to production. As a result, it has significantly reduced gasoline and diesel exports to countries outside the CIS. This decision was in response to unplanned repairs at the refineries and disruptions caused by fires. Moreover, these cuts are part of a broader OPEC+ strategy to support oil prices. They achieve this through voluntary reductions in oil and fuel exports. Meanwhile, forecasting non-farm payrolls data introduces another layer of complexity. It has implications for US interest rates, thus influencing market expectations. As a result, this anticipation affects the performance of the dollar, which in turn affects oil prices.
