Oil prices retreated from a three-week high as ongoing concerns about global demand overshadowed tensions in the Middle East. Brent crude slipped below $83 a barrel, reversing a nearly 8% rally seen over the past two weeks, while West Texas Intermediate hovered around $79. The International Energy Agency’s warning last week of potential oversupply throughout the year, coupled with China’s sluggish economy, has cast doubt on consumption levels.
Despite these demand worries, ongoing conflicts such as attacks on shipping in the Red Sea and the Israel-Hamas war have prevented prices from plummeting. Israel’s threat of a ground offensive in Gaza’s Rafah area unless hostages are released by mid-March has added to geopolitical tensions in the region.
Vivek Dhar, an analyst at Commonwealth Bank of Australia, remarked, “For any oil price premium to be sustained in oil markets from Middle East tensions, physical oil supply needs to be disrupted.” He anticipates that Brent futures will likely relinquish their recent gains in the coming weeks as concerns over supply intensify.
Bullish sentiment for global benchmark Brent crude is at its highest level since 2021, fueled by escalating geopolitical risks in a region responsible for roughly a third of the world’s crude production. Meanwhile, attention is also focused on fuel markets, experiencing one of the most active trading periods for refined products in years, with year-to-date price gains outpacing those for crude.
Chinese markets, which recently reopened after the week-long Lunar New Year holiday, saw crude prices in Shanghai rise following the break.
