Oil prices recover slightly following steep drop amid geopolitical tensions
Oil prices inched higher on Wednesday amid uncertainty over what may happen next in the Middle East conflict, after demand concerns knocked the market to its lowest since early October in the previous session.
Brent crude oil futures rose 19 cents, or 0.3 per cent, to $74.44 a barrel by 0630 GMT. US West Texas Intermediate crude futures climbed 24 cents, or 0.3 per cent, to $70.82 per barrel.
Oil prices tumbled more than 4 per cent to a near two-week low on Tuesday due to a weaker demand outlook and after a media report said Israel would not strike Iranian nuclear and oil sites, easing fears of a supply disruption.
However, concerns about an escalation in the conflict between Israel and Iran-backed militant group Hezbollah persist, with the US on Tuesday saying it opposed the scope of Israel’s air strikes in Beirut over the past few weeks.
“Following the recent retracement in prices, we may expect some room for prices to stabilise in the near term, as market participants reassess further developments on the geopolitical front,” said Yeap Jun Rong, market strategist at IG.
“More clarity over China’s fiscal policy awaits as well, and the lack of specifics seems to cast some uncertainties over the eventual impact on its oil demand outlook,” said Yeap.
China may raise an additional 6 trillion yuan ($850 billion) from special treasury bonds over three years to stimulate a sagging economy, local media reported, though that failed to revive sentiment in the country’s stock market.
On the oil demand side, both the Organization of the Petroleum Exporting Countries and the International Energy Agency this week cut their forecasts for global oil demand growth in 2024, with China accounting for the bulk of the downgrades.
For now, the market will be looking out for the latest US oil inventory data, with the American Petroleum Institute’s weekly report due later on Wednesday and Energy Information Administration data to come on Thursday. The reports are coming a day later than normal following a federal holiday.
Analysts polled by Reuters expected crude stockpiles rose by about 1.8 million barrels in the week to Oct. 11.