Oil Dips, Traders Viewed As Needing A Steady Fix Of Geopolitical Drama

Meanwhile, indicators continue to show tightness and strong demand: File Image/Pixabay

No sooner did crude trading in the previous session end with a significant price bump due to reports of strong demand growth in 2024 than traders worried about oversupply on Friday, thus causing the commodity to decline - albeit modestly.

West Texas Intermediate settled down 67 cents to $73.41 per barrel following the disclosure of slower-than-expected economic growth in China during the fourth quarter; this stoked doubts that Chinese demand will drive global growth this year.

This reportedly trumped fears stemming from ongoing Houthi attacks on merchant vessels in the Red Sea and the U.S.'s retaliatory efforts.

Brent also settled lower on Friday, by 54 cents to $78.56 per barrel.

Rebecca Babin, a senior energy trader at CIBC Private Wealth, said the market remains mired in pessimism, and "geopolitical headlines are the oxygen keeping a bid in crude; it can only stay higher for so long without a new one."

Daniel Ghali, a commodity strategist at TD Securities, added that "Flows from trend-following algorithms are now overwhelmingly driving" trading.

The irony is that many segments of the oil industry continue to suggest tightness, with WTI's prompt spread surging back into a backwardated structure earlier this week.

Also, about 30 percent of oil output in North Dakota, the U.S.'s third largest producing state, remained suspended due to extreme cold weather conditions and could take months to resume, it was reported on Friday.

All of this came on the heels of the International Energy Agency earlier this week raising its 2024 global demand forecast to 1.24 million barrels per day (bpd) in 2024, up 180,000 barrels from its previous forecast.

Bjarne Schieldrop, analyst at SEB, remarked, "The forecast for global oil demand growth remains unclear, with stakeholders and research institutions providing widely differing projections."