Oct 15 2024: Oil prices dropped by up to $3, reaching a near two-week low during Asian trading on Tuesday, driven by a weakening demand outlook and reports that Israel may refrain from targeting Iranian oil, easing fears of a supply disruption.
Brent crude futures fell $2.81, or 3.6%, to $74.65 per barrel at 06:40 GMT, after touching a low of $74.26, the lowest since October 2. Similarly, U.S. West Texas Intermediate (WTI) futures dropped $2.72, or 3.7%, to $71.11 per barrel, after hitting a low of $70.75, the weakest level since October 3.
Both oil benchmarks had already declined by around 2% on Monday and are now down nearly $5 for the week, erasing most of the gains from the seven sessions prior to Friday, when concerns about supply risks intensified as Israel considered retaliation against an Iranian missile attack.
However, a report from The Washington Post on Monday indicated that Israeli Prime Minister Benjamin Netanyahu informed the U.S. that Israel would focus on striking Iranian military targets rather than nuclear or oil infrastructure, which helped ease market fears of a supply disruption.
“Traders have started pulling back the ‘war premium’ on prices due to weakening demand,” said Priyanka Sachdeva, senior market analyst at Phillip Nova. “However, geopolitical factors are still supporting oil prices at this level. Without these concerns, oil could have dropped even further, possibly below the $70 per barrel mark, given the current weak demand narrative.”
On Monday, the Organization of the Petroleum Exporting Countries (OPEC) reduced its forecast for global oil demand growth in 2024, primarily due to a downgrade in China’s demand projections. China’s demand is now expected to grow by 580,000 barrels per day (bpd) this year, down from the previous estimate of 650,000 bpd.
OPEC also cut its global oil demand growth estimate for 2024 to 1.64 million bpd, down from 1.74 million bpd.
China’s customs data showed that oil imports in September were lower compared to the same period last year, as refineries reduced purchases amid weak domestic fuel demand and shrinking export margins.
Independent market analyst Tina Teng noted that while the demand outlook remains weak due to record-high U.S. production and softer Chinese demand, “oil has pulled back from the surge caused by Middle East tensions, as the market may have overreacted initially.”
Meanwhile, in the Middle East, Israel expanded its military operations against Hezbollah militants in Lebanon on Monday, with airstrikes in the northern region killing at least 21 people.