Oil prices experienced a slight dip on Monday despite escalating tensions in the oil-rich Middle East. The primary concerns among investors were centered around weakening demand in China and an oversupply of oil globally. The price of Brent crude, the global benchmark, initially rose but later decreased by 0.6% to just above $71 per barrel. Similarly, West Texas Intermediate, the US benchmark, dropped by 0.8% to trade at nearly $68.
These prices remain significantly lower than the levels reached last October following Hamas' attack on Israel. Analysts suggest that recent Israeli airstrikes against Hezbollah and the Houthis have not had a substantial impact on global oil supplies. However, there are concerns that a potential strike by Israel on Iran's nuclear facilities could lead to disruptions in the flow of oil and gas from the Middle East, resulting in a significant spike in oil prices.
Furthermore, worries about reduced oil demand in China, the largest oil importer globally, have contributed to the price stability in recent months. Additionally, record oil output from the United States has also played a role in keeping prices in check.
The International Energy Agency has projected that global oil production growth will lead to an increase in the world's spare oil capacity cushion, a situation reminiscent of the levels observed during the coronavirus pandemic when oil prices plummeted. By 2030, it is anticipated that global oil supply will surpass demand by a substantial 8 million barrels per day, according to the agency's predictions.
