Oil Prices Trend Downward

Investing.com– Oil prices fell slightly in early Asian trade on Tuesday, steadying after clocking sharp gains in the prior session due to production disruptions in Norway and escalating tensions in the Russia-Ukraine war.

Prices had rebounded from near three-week lows on Monday as some elements of bargain buying emerged following recent losses. However, a bleak outlook for global demand and the potential for a supply glut limited oil's rally.

Brent oil futures expiring in January dropped 0.2% to $73.19 a barrel, while West Texas Intermediate crude futures slipped 0.1% to $69.07 a barrel by 20:08 ET (01:08 GMT).

Oil Rises Sharply on Norway Disruptions

Oil prices surged over 3% on Monday after Equinor (NYSE:EQNR) announced a halt in production at its Johan Sverdrup oilfield in Norway. This field is the largest oilfield in Western Europe, and an outage raises concerns about oil supplies in the region.

Equinor attributed the halt to an onshore power outage, with no clear timeline for when production would resume. As of October, Sverdrup produced around 755,000 barrels of oil equivalent per day, but production is expected to decline from current peaks by early next year.

Russia-Ukraine Escalation Buoys Oil

Tensions from the Russia-Ukraine conflict also influenced oil prices, as traders priced in a greater risk premium following the Biden administration’s approval for Ukraine to use U.S.-made weapons against Russian targets.

The Kremlin condemned this decision, warning that it could heighten tensions with the NATO alliance. Despite Ukraine’s continued attacks on Russia’s oil infrastructure, these incidents have not substantially affected Moscow’s oil exports yet. Traders remain concerned that further assaults on oil facilities could disrupt output.

China Demand, Oversupply Fears Pressure Oil

Oil prices faced losses from the previous week, primarily due to fears about slowing demand in China, the top oil importer. Recent stimulus measures in China failed to impress traders, and economic data showed little improvement.

Moreover, concerns about a potential market glut in 2025, driven by increasing production from countries outside the Organization of Petroleum Exporting Countries (OPEC) and allies, weighed on prices. Production in the U.S. remains near record highs, above 13 million barrels per day.