Oil Prices Are Low As Markets Assess Iran Tensions And China's Reopening

Oil prices remained in a tight range on Monday due to uncertainty around a drone strike on an Iranian plant and a Russia-led supply glut, despite optimism on a demand revival in China.

A U.S. official linked an Israeli drone strike on an Iranian defense site over the weekend, which might lead to an increase of political tensions in the Middle East and a disruption of global crude supply.

After the Lunar New Year vacation, Chinese markets resumed with a bang, with high expectations that the country's economic revival will be a main driver of oil demand this year. According to reports released over the weekend, travel in the country rebounded significantly during the weeklong holiday, and the government pledged to assist local economic growth.

By 21:33 ET, Brent oil prices increased 0.3% to $86.65 per barrel, while West Texas Intermediate crude futures increased 0.3% to $79.94 per barrel (02:33 GMT). However, both contracts suffered their first weekly loss in three weeks as data indicated a rise in January crude exports from Russia's Baltic ports.

Oil prices are expected to end the month of January roughly unchanged, as traders weigh a potential resurgence in Chinese demand against fears of a worldwide recession in 2019.

While a Chinese rebound is anticipated to finally help crude demand this year, the country is still battling its largest COVID-19 outbreak to date, which has created doubt regarding the timing of any recovery.

The Organization of Petroleum Exporting Countries and its allies (OPEC+) are scheduled to meet on February 1 to determine the cartel's monthly output goals.

In spite of considerable uncertainty regarding the near-term course of oil demand, it is anticipated that the company will essentially sustain current production levels.

Since the beginning of the year, oil prices have fluctuated wildly, with fears of a global recession also playing a role. Despite the fact that the U.S. economy fared better than anticipated in the fourth quarter of 2022, investors are concerned that this momentum may wane as the consequences of tighter monetary policy and relatively high inflation persist.

The markets await this week's Federal Reserve meeting for additional guidance on the world's largest economy. This week also brings key economic statistics from China and the Eurozone.