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By Ambar Warrick
Investing.com — Oil prices kept to a tight range on Monday amid uncertainty over a drone attack on an Iranian facility and a Russia-led supply glut, although optimism over a demand recovery in China helped drive some gains.
A drone strike on an Iranian defense facility over the weekend was attributed to Israel by a U.S. official, and could potentially spell an escalation in political tensions in the Middle East, which in turn could disrupt global crude supplies.
Chinese markets reopened with a bang after the Lunar New Year holiday, with expectations high that an economic recovery in the country will be a key driver of crude demand this year. Reports over the weekend said that travel in the country had recovered sharply during the week-long holiday, while the government vowed to support local economic growth.
Brent oil futures rose 0.3% to $86.65 a barrel, while West Texas Intermediate crude futures rose 0.3% to $79.94 a barrel by 21:33 ET (02:33 GMT). But both contracts were nursing their first weekly loss in three weeks, following data that pointed to increased crude exports from Russia’s Baltic ports in January.
Oil prices are set to close January largely flat, with traders weighing a potential recovery in Chinese demand against concerns over a global recession this year.
While a Chinese recovery is expected to eventually benefit crude demand this year, the country is still grappling with its worst yet COVID-19 outbreak, which has brewed uncertainty over the timing of such a recovery.
Focus this week is also on a meeting of the Organization of Petroleum Exporting Countries and its allies (OPEC+), which is expected to convene on February 1 to decide on the cartel’s monthly production targets.
But the group is largely expected to maintain production at current levels, amid some uncertainty over the path of near-term crude demand.
Oil prices have marked wild swings so far this year, with concerns over a global recession also coming into play. While the U.S. economy performed better than expected in the fourth quarter of 2022, markets fear that this momentum may run out of steam as the effects of tighter monetary policy and relatively high inflation continue to be felt.
Markets are now awaiting a Federal Reserve meeting this week for more cues on the world’s largest economy. Key economic indicators from China and the euro zone are also on tap this week.
Source: Investing.com
