Oil Futures Rise, But Remain Rangebound

Oil futures moved higher on Monday, as investors carefully consider geopolitical tensions and the outlook for demand. Despite the increase, prices continue to be rangebound.

Price Moves

• The West Texas Intermediate crude for February delivery (CL.1, +0.34% CLG24, +0.34%) saw a rise of 25 cents, or 0.3%, reaching $73.66 a barrel on the New York Mercantile Exchange.
• The March WTI (CL00, +0.14% CLH24, +0.14%), the most actively traded contract, was also up by 21 cents, or 0.3%, at $73.46 a barrel.
• The global benchmark, March Brent crude (BRN00, +0.06% BRNH24, +0.06%), rose by 13 cents, or 0.2%, reaching $78.69 a barrel on ICE Futures Europe.

Market Drivers

Last week, WTI experienced a 1% increase based on the front-month contract, while Brent saw a modest 0.3% rise. According to analysts at Sevens Report Research, the gains in oil prices last week were largely influenced by cold weather in North Dakota and other parts of the northern U.S., resulting in production outages.

Although developments in the Middle East have occasionally pushed oil prices higher, there has not been a substantial geopolitical risk premium. In fact, WTI is currently trading around $20 below its 2023 high set in late September.

The “fear bid” related to the Israel-Hamas war has weakened due to the fact that the tensions and fighting in the region have not significantly impacted global oil supply so far. This was the initial concern surrounding the situation.

Analysts believe that oil fundamentals slightly favor the bears, as OPEC+ is unlikely to further reduce production, and worries about demand persist due to the lack of indication that global central banks will act swiftly to cut interest rates.