Oil prices steady after sharp falls, demand worries remain

LONDON (January 9) Oil prices steadied as traders eye incoming oil supply data. This comes after both Brent crude futures and US West Texas Intermediate crude futures staged sharp falls in the previous session. IGTV's Angeline Ong has the details.

Oil prices bounce back after sharp drop in previous trading session

US crude oil has increased by approximately 1.2%, surpassing the 2% mark, and Brent crude oil has also recovered by 1.7%. This change in fortunes comes on the back of concerns about tensions in the Middle East, uncertainties regarding demand, higher OPEC production, and price cuts implemented by Saudi Arabia that had unsettled the market.

Impact of the price cuts

These price cuts have raised worries about weak demand, but the ongoing conflicts in the Red Sea and Gaza are currently providing support to oil prices. However, the big question is how long this support will continue and if the Saudi price cuts will stimulate consumption. If there is no strong recovery in China or the US, it could result in a further decline in demand, which puts the Saudis and their partners in a risky position after already implementing larger-than-expected price reductions.

The worry now lies in the possibility of a slow recovery in China or the United States, which could lead to a sustained decrease in demand. This situation would put the Saudis and their partners in a challenging position, especially considering that they have already implemented larger-than-anticipated price cuts. The success of these cuts in encouraging consumption back into the market depends on the pace of economic recovery in these major economies. If a strong recovery does not materialise, it could worsen the fragility of the situation for the Saudi-led coalition, potentially resulting in further economic difficulties.

IG