West Texas Intermediate crude oil is now trading at $58.16 having travelled between a low of $57.97 and $59.26, -1.71% on the day so far and well below the $65.65s post Iranian missile strikes on Iraqi targets.
Oil prices edged down on Monday as fears of conflict between the United States and Iran eased, although the decline was checked by the planned signing of an initial US-China trade deal this week, which could boost demand.
Analysts said the fall in crude oil futures was mostly due to trimming of positions by traders amid weak spot demand.
"It's hard for crude oil to go higher if refiners continue to lose money or at best break even on gasoline", said Tom Kloza, global head of energy analysis at the Oil Price Information Service (OPIS).
However, Tchilinguirian, a global oil strategist said the rise in oil prices may continue for the short term bases adding that the Organization of Petroleum Exporting Countries (OPEC) and its allies should not be bothered to talk about another production cuts for the meantime. Distillate stockpiles rose by 5.3 million barrels, versus forecasts for a build of 3.9 million barrels.
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She said it remains to be seen if co-operation will continue, but they believe everyone wants a full understanding of the tragedy. Dutch security investigators recommended more be done to ensure that better protect airspace for civilians in times of conflict.
On Monday, the US heating oil crack spread, a measure of the profit margin for refining crude into diesel or heating oil, fell to $21.56, the weakest in nearly five months. "The heating oil crack is just getting killed", said Robert Yawger, director of energy futures at Mizuho in NY, adding lackluster demand for the product has weighed on crude prices.
Brent hit four-month highs of $71.75 last week, while WTI surged to an eight-month peak of $64.72, reacting to the Tehran action which was in retaliation to the USA killing of top Iranian general Qasem Soleimani on January 3.
The U.S. -Chinese trade war had a tangible impact on global oil demand growth previous year, which reached 890,000 barrels per day compared with initial forecasts of 1.5 million bpd, Tamas Varga, an analyst at PVM brokerage said in a note.
Global benchmark Brent touched $71.75 per barrel last week before ending on Friday below $65. "There's been an abject lack of heating oil demand", Kilduff said.
The outlook for oil demand was supported ahead of the signing at the White House on Wednesday of a Phase 1 U.S.