Global Oil Markets Experience Volatility Amidst Middle East Tensions and Demand Concerns
As the Middle East conflict continues to unfold, oil prices have stabilized in Asian trading, with traders weighing the impact of potential ceasefire talks against bearish demand expectations. Brent crude futures edged up 0.3% to $77.4 a barrel, while U.S. West Texas Intermediate futures rose 0.2% to $73.71 a barrel.
Despite a 4% plunge in the previous session following reports of a possible Hezbollah-Israel ceasefire, market sentiment remains cautious due to the threat of an Israeli attack on Iran’s oil infrastructure. According to Priyanka Sachdeva, senior market analyst at Phillip Nova, “The constant flux of Middle Eastern headlines has distracted investors from the underlying fundamentals of the oil market, leading to a ‘buy the rumor’ mentality that sidelines reality.”
The recent rally in oil prices, which began after Iran launched a missile attack on Israel on October 1, has been tempered by concerns over demand. Data from the American Petroleum Institute showed a significant increase in U.S. crude oil stocks, exceeding analyst expectations. Meanwhile, fuel stockpiles declined, but weak demand continues to dominate the fundamental outlook.
The U.S. Energy Information Administration (EIA) has downgraded its 2024 forecast for global oil demand growth by 20,000 barrels per day, citing weaker industrial production and manufacturing growth in the U.S. and China. Additionally, concerns over China’s lack of stimulus measures to boost its economy have capped oil market gains.
As Yeap Jun Rong, IG market strategist, noted, “China’s absence of new stimulus measures has disappointed many market participants, who were hoping for a fiscal policy similar to the ‘bazooka’ delivered in late-September. The lack of progress has clearly had a negative impact on the market.”
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