Oil Prices Drop, Greenland Effect Tenses Markets
Oil prices weakened as global markets re-emerged in tension over US President Donald Trump's push to take over Greenland. Risk-off sentiment resurfaced, making investors more cautious about riskier assets, including commodities like oil.
Brent fell to near $64 per barrel, while WTI hovered below $60. Oil volatility remains high as the market is sensitive to geopolitical headlines and the potential for a trade war.
The Greenland issue has also shaken US-Europe relations. This uncertainty has dampened risk appetite, weakening stocks and dragging down oil prices, as traders worry about a slowing economy and a drop in energy demand.
Market participants are also awaiting the latest supply-demand figures from the International Energy Agency (IEA), which will release its monthly outlook. The current high expectation is that global supply is expected to increase faster than demand, leading the market to fear a "supply glut."
IEA Executive Director Fatih Birol stated that downward pressure on oil and gas prices could persist for the next 3-4 years due to large supplies, particularly from the US and several other countries. This reinforces the narrative that the oil rally will be difficult to sustain.
Meanwhile, market attention is also focused on Venezuelan exports. Traders are monitoring where Venezuelan oil flows will shift following US intervention earlier this month, especially since much of it was previously shipped to China.
Trump is also scheduled to deliver a speech at the Davos forum. Ahead of the speech, the US government has pledged to impose 10% tariffs on eight European countries over the Greenland dispute—raising the risk of new trade friction that could depress growth and energy demand.
However, not all signals are bearish. There are pockets of tightness in the physical market: near-term contract spreads are still in backwardation (usually considered bullish). Production disruptions at a major Kazakhstani field and shipping restrictions at the Caspian Pipeline Consortium pipeline facility are also supporting the physical market.
In midday trading in Singapore, Brent March contract fell around 1.1% to $64.18, while WTI March contract fell around 1% to $59.78.
5 key points:
- Oil fell as the market was nervous about Trump's push on Greenland and geopolitical risks.
- Brent approached $64/barrel, WTI below $60; volatility remains high.
- The market awaits the IEA outlook, with concerns about supply > demand (potential glut).
- The threat of 10% tariffs on European countries increases the risk of a trade war that could suppress energy demand.
- However, the physical market still received support from backwardation and supply disruptions in Kazakhstan/Black Sea. (asd)
Source: Newsmaker.id
