Oil dips in choppy trade amid China economic concerns, Middle East tensions
Commodities
Published Jan 28, 2024 07:03PM ET Updated Jan 29, 2024 09:56AM ET
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Oil dips in choppy trade amid China economic concerns, Middle East tensions © Reuters. A view shows oil tanks of Transneft oil pipeline operator at the crude oil terminal Kozmino on the shore of Nakhodka Bay near the port city of Nakhodka, Russia August 12, 2022. REUTERS/Tatiana Meel
By Natalie Grover
LONDON (Reuters) -Oil prices dipped on Monday in choppy trade as China's ailing property sector sparked demand worries, while rising tensions over the weekend in the Middle East intensified oil supply concerns.
Brent crude futures were down 62 cents to $82.93 a barrel by 1430 GMT while U.S. West Texas Intermediate crude futures were down 59 cents to $77.42.
Both benchmarks yo-yoed over the course of the day, having jumped roughly 1.5% earlier in the session.
"The market is precarious as ever, the weekend attack of the fuel tanker in the Red Sea and the killing of US personnel in Jordan increased the geopolitical temperature, which was reflected in the strong opening this morning," said Tamas Varga, an analyst at oil broker PVM.
Attention shifted to the frail Chinese property sector, after a Hong Kong court on Monday ordered the liquidation of property giant China Evergrande (HK:3333) Group in a sign of a deepening crisis in China's real estate sector, knocking sentiment on crude demand in the world's largest oil importer.
Meanwhile, lingering high interest rates were also in focus on Monday after European Central Bank policymakers were unable to reach a consensus on Monday over when interest rates should be cut.
"Given the persistent and severe hostilities in the Middle East and adverse impact attacks had on Russian refineries, dips will probably be deemed to be irresistible buying opportunities," PVM's Varga said.
Risks of a widening conflict in the Middle East are burgeoning, with a drone strike by Iran-backed militants on U.S. troops in Jordan last weekend.
Commodities trader Trafigura, meanwhile, is assessing the security risks of further Red Sea voyages after firefighters put out a blaze on a tanker attacked by Yemen's Houthis a day earlier.
"We believe the deaths of three U.S. service members today in Jordan marks a critical inflection point in the ongoing conflict in the Middle East," said Helima Croft, an analyst at RBC Capital Markets, adding that a more direct confrontation with Iran heightened the risk of regional energy supply disruptions.
Russia, meanwhile, is likely to cut exports of naphtha, a petrochemical feedstock, by between 127,500 and 136,000 barrels per day - about a third of its total exports - after fires disrupted operations at Baltic and Black Sea refineries, according to traders and LSEG ship-tracking data.
Another Russian oil facility came under attack on Monday, with Russian authorities indicating they had thwarted a drone attack on the Slavneft-YANOS refinery in the city of Yaroslavl.