Analysts note that alternative non-Russian oil grades (instead of supplies from Russia) are currently facing high costs. Some independent refiners in China have suspended their operations or plan to do so in an indefinite timeframe due to new tariffs and tax policies, as a result of which their inventories are declining, sources told Reuters.
India, being the third largest importer of crude oil in the world, has also encountered supply disruptions from Russian oil; however, refiners there have been utilizing a temporary reduction in sanctions to complete purchases before March, analysts at FGE reported. At the same time, the US is forecasting warmer weather over the course of the week, which has an impact on the demand for heating oil following a period of cold weather.
"General caution in a risky environment, as well as weak indicators of business activity in China, which are further exacerbating the perspective of demand for oil in China, could negatively reflect on oil prices," said IG analyst Yeap Yun Rong.
Oil prices decreased, but remained close to a two-week minimum on Tuesday following weak economic data from China and forecasts of warming weather, which undermined demand perspectives. Brent crude oil futures fell by 60 cents, or 0.78%, to $77.68 per barrel as of 07:30 GMT.
China, the largest crude oil importer in the world, reported on Monday an unexpected reduction in production activity in January, which added to the concerns regarding global oil supply. WTI crude oil prices have dropped to a minimum since January 2. "Price decreases in the oil market seem to be somewhat limited due to the impact of disruptions in the American market by energy technical companies," noted Yeap from IG.
Nevertheless, caution, in general, remains as the introduction of American tariffs on February 1 may create risks for global growth, which could lead to pressure on oil prices, added Yeap.
"Temperatures in both regions (the US and Europe) are rising, which will reduce demand for heating oil," said an analyst from StoneX, Alex Hodes, on Monday. Analysts at FGE expect that refiners in Shandong province will reduce crude oil deliveries by 1 million barrels in the near future due to the ban imposed by the Group of Seven nations on tankers that have come under US sanctions.
Futures for American WTI crude rose by 50 cents, or 0.68%, to $73.67.
