Oct 22 2024: Oil prices fell on Tuesday as U.S. Secretary of State Antony Blinken arrived in Israel to push for a ceasefire in the Middle East, while concerns over slowing oil demand in China, the world’s top importer, continued to weigh on the market.
Brent crude futures for December dropped 60 cents, or 0.8%, to $73.69 per barrel by 0717 GMT. U.S. West Texas Intermediate (WTI) crude for November, on its final day as the front month, dipped by 6 cents to $70.50 per barrel. More actively traded December WTI futures fell 57 cents, or 0.8%, to $69.47 per barrel.
Both Brent and WTI saw nearly 2% gains on Monday, recovering some of last week’s 7% decline. Ongoing conflict in the Middle East and concerns over potential disruptions to oil supplies from Israel’s expected retaliation against Iran contributed to market nervousness.
Analysts pointed to Monday’s rise as driven by technical profit-taking and short-covering, given the overall bearish trend in oil prices, as forecasts continue to predict softer demand and an oversupplied market, said Priyanka Sachdeva, senior analyst at Phillip Nova.
Middle East and China Demand Remain Key Drivers
Blinken’s arrival in Israel marks the start of a Middle East tour, aiming to revive talks for a Gaza ceasefire and reduce conflict spillover into Lebanon.
“Crude prices are swinging in response to mixed developments from the Middle East, shifting between escalation and de-escalation,” said Satoru Yoshida, a commodity analyst at Rakuten Securities. He added that prices could rise if China’s economic recovery shows stronger signs, supported by Beijing’s stimulus and an improving U.S. economy following interest rate cuts. However, broader global economic uncertainty is likely to limit gains.
China’s recent cut to benchmark lending rates, part of a broader stimulus effort to revive its economy, followed data showing the country’s slowest growth pace since early 2023 in the third quarter, raising concerns over future oil demand. Despite these challenges, Saudi Aramco remains “fairly bullish” on China’s oil demand, especially with the government’s economic stimulus efforts, according to the state-owned oil giant’s head.
Stronger Dollar Adds Pressure to Oil Market
A stronger U.S. dollar, driven by easing global inflation, also weighed on oil prices. A strong dollar makes dollar-priced commodities more expensive for holders of other currencies, further pressuring oil prices.
Meanwhile, U.S. crude stockpiles were expected to rise last week, with distillate and gasoline inventories likely down, according to a preliminary Reuters poll.
