WTI crude futures declined by over 1%, approaching $58 per barrel on Tuesday. This drop continues a two-day downturn following a 2% decrease on Monday. The fall in prices is primarily attributed to signals of increasing supply, overshadowing ongoing geopolitical risks. Market participants are anticipating updates from the International Energy Agency (IEA) and OPEC+ later in the week. This follows the IEA's prediction of a significant surplus by 2026 and OPEC+'s adjustment of its Q3 forecast from a deficit to a surplus.
In a related development, China increased its January imports of Saudi crude to the highest level in five months. This surge was prompted by Riyadh's decision to reduce the official selling prices, marking the smallest premium for Asia in five years. Furthermore, Iraq resumed production at the West Qurna-2 field, effectively adding approximately 0.5% to global supply. These additional quantities, alongside recent increases in US inventory, have weakened the argument for an immediate drawdown and have counterbalanced the premiums associated with the situations in Ukraine and Venezuela.
Markets remain attentive to the Federal Reserve, where a widely anticipated 25 basis point rate cut could potentially bolster fuel demand in the upcoming year.
