Global Oil Prices Stabilize Amid Weak Economic Data and Shifting Weather Forecasts
The oil market is experiencing a period of uncertainty, with prices hovering near a two-week low. On Tuesday, Brent crude oil futures rose by 0.78% to $77.68 per barrel, while U.S. West Texas Intermediate crude futures increased by 0.68% to $73.67.
China’s Economic Slowdown Weighs on Oil Demand
China, the world’s largest importer of crude oil, reported an unexpected contraction in manufacturing activity in January, sparking concerns over global crude demand growth. This news, combined with the latest U.S. sanctions on Russian oil trade, is expected to hit China’s crude oil demand hard. FGE analysts predict that refineries in Shandong may lose up to 1 million barrels per day of crude supply in the near term.
Refinery Disruptions in China and India
Several independent refineries in China have halted operations or plan to do so for indefinite maintenance periods due to new Chinese tariff and tax policies. Meanwhile, India, the world’s third-largest crude importer, faces disruptions to Russian oil supply. However, Indian refiners are taking advantage of a wind-down period in the sanctions to make purchases until March.
Weather Forecasts Impact Heating Fuel Demand
In the U.S., warmer-than-normal temperatures are expected through this week, which is weighing on demand for heating fuels. StoneX oil analyst Alex Hodes notes that “temperatures in both regions (U.S. and Europe) are increasing, allowing for heating fuel demand to slide off some.”
Broader Market Pressures
The oil market is also feeling the impact of broader financial market pressures. A surge of interest in a low-cost artificial intelligence model launched by Chinese firm DeepSeek has led to a decline in tech stocks, which is affecting the oil market. IG analyst Yeap Jun Rong warns that “losses appear relatively limited from the turmoil in U.S. tech stocks,” but caution is likely to persist as the Feb. 1 deadline for U.S. tariffs approaches.
Uncertainty Ahead
As the oil market navigates these challenges, uncertainty is likely to persist. Any potential trade restrictions could introduce downside risks to global growth, which could translate to downward pressure on oil prices. As Yeap notes, “the general tone of caution in the risk environment… may serve as a drag on oil prices.”
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