Oil Prices Hit Two-Week Lows as Demand Fades

Oil prices rose slightly on Tuesday but hovered near two-week lows as weak economic data from China and warmer weather forecasts dampened demand prospects.

Brent crude futures gained $0.42, or 0.5%, to $77.50 per barrel, while U.S. West Texas Intermediate (WTI) crude futures rose $0.34, or 0.5%, to $73.51 per barrel. On Monday, Brent hit its lowest level since January 9, while WTI reached its lowest point since January 2.

USOIL

Chinese Demand Decline

China, the world’s largest crude importer, reported an unexpected contraction in manufacturing activity for January on Monday, raising concerns about global crude demand growth.

The cautious tone in risk markets, coupled with weaker Chinese PMI figures, casts further doubt on China’s oil demand outlook, potentially weighing on prices.

Additionally, China’s crude demand may face further challenges due to recent U.S. sanctions on Russian oil trade. While alternative crude supplies are being sought, they come at significantly higher costs.

Other Catalyst Driving Oil Demand Lower

India, the world’s third-largest crude importer, is also navigating disruptions in Russian oil supply but has taken advantage of a temporary relaxation in sanctions to secure purchases through March.

In the U.S., warmer-than-usual weather forecasts for the week are weighing on demand for heating fuels, following a recent cold snap that boosted natural gas and diesel prices in previous sessions.

Ignacio Teson

Economist and Financial Analyst

Ignacio Teson is an Economist and Financial Analyst. He has more than 7 years of experience in emerging markets. He worked as an analyst and market operator at brokerage firms in Argentina and Spain.