Oil Prices Steady Amid Middle East Tensions and Demand Concerns
Oil prices stabilized in Asian trading on Wednesday as investors balanced Middle East conflict developments against bearish demand forecasts.
Brent crude futures gained 22 cents, or 0.3%, reaching $77.4 per barrel by 0349 GMT. Meanwhile, U.S. West Texas Intermediate (WTI) futures increased by 14 cents, landing at $73.71 per barrel.
The previous session saw a more than 4% drop in oil prices, following reports of a potential ceasefire between Hezbollah and Israel. However, markets remain cautious about the risk of an Israeli strike on Iran’s oil infrastructure.
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“The daily shifts in Middle East news—ranging from ceasefire talks to escalations in conflict—are distracting investors from core market fundamentals,” noted Phillip Nova’s senior market analyst, Priyanka Sachdeva, in an email. “Oil markets are largely driven by speculative sentiment, with ‘buying the rumor’ mentality overshadowing the underlying fundamentals.”
Tuesday’s sell-off came after a price surge earlier in the month, sparked by an Iranian missile strike on Israel on October 1. This led to an 8% weekly gain, the largest in over a year by Friday.
In the latest updates, Hezbollah officials seemed to step back from demanding a Gaza truce as a precondition for a ceasefire in Lebanon. Hezbollah’s deputy leader, Naim Qassem, voiced support for a truce in a televised address, marking the first time that a Gaza ceasefire wasn’t linked directly to the peace conditions.
On the demand side, the American Petroleum Institute reported a significant increase in U.S. crude oil inventories, up nearly 11 million barrels last week, surpassing analyst predictions. However, fuel stocks declined during the same period.
The outlook for demand remains weak. The U.S. Energy Information Administration (EIA) on Tuesday lowered its global oil demand growth forecast for 2024 by 20,000 barrels per day, now expecting it to reach 103.1 million barrels per day. This downgrade was attributed to slower industrial and manufacturing growth in both the U.S. and China.
Additionally, concerns over Beijing’s limited stimulus efforts weighed on oil market optimism. During a press conference on Tuesday, Chinese officials provided few details on new economic support measures.
“China’s absence of new stimulus is dampening sentiment,” commented IG market strategist Yeap Jun Rong. “While markets had hoped for substantial fiscal measures similar to those rolled out in late September, the latest announcements fell short of those expectations.”
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