Oil prices drop globally amidst concerns over US economic policies

WEB DESK: Global oil prices opened the week with a downward trend, extending losses due to US job data diminishing the likelihood of immediate interest rate cuts in the world’s largest economy.

Brent crude is presently trading at $77.22 per barrel, reflecting a 0.16 per cent decline on the day, while West Texas Intermediate crude (WTI) stands at $72.21 per barrel, down by 0.18 per cent compared to the previous close.

Both benchmarks experienced their most significant weekly drop since October 2023, primarily attributed to concerns about demand despite ongoing supply disruptions in the market.

Analysts from ING noted that the weakening was partially driven by hopes of a ceasefire between Israel and Hamas, although such an agreement does not seem imminent at present.

Investors remain cautious about potential escalation in the Middle East conflict, particularly after the US signalled further strikes on Iran-backed groups in response to an attack on US troops in Jordan.

The US is also continuing its efforts against Houthi rebels in Yemen, whose attacks on shipping vessels have disrupted global oil trading routes, albeit with minimal impact on supply.

Commonwealth Bank commodities analyst Vivek Dhar suggested that the dominant effect on oil markets would likely come from Israel-Hamas ceasefire talks, reducing tensions in the Middle East and consequently discounting supply disruption risks. This, he noted, could keep Brent futures below $80 a barrel.

The US Department of Justice announced sanctions-evasion charges and seizures linked to an oil trafficking network supporting Iran’s Islamic Revolutionary Guard Corps. Over 520,000 barrels of sanctioned Iranian oil aboard the crude tanker Abyss were seized in the Yellow Sea en route to China.

In Russia, two Ukrainian attack drones reportedly struck the largest oil refinery in the country’s south, causing disruptions in Russia’s naphtha exports, a petrochemical feedstock. The 300,000-bpd Volgograd refinery, owned by Lukoil, confirmed it was operating normally.

In the US, power at BP’s 435,000-bpd oil refinery in Whiting, Indiana, was restored by midday on Friday, but the company has yet to set a date for restarting the plant.