Oct 9 2024: Oil prices edged higher on Wednesday as geopolitical developments in the Middle East took center stage, counterbalanced by cautious demand expectations ahead of a key meeting on China’s fiscal policy.
Brent crude futures increased by 45 cents, or 0.6%, reaching $77.63 per barrel by 0703 GMT, while U.S. West Texas Intermediate (WTI) futures rose by 33 cents to $73.90 per barrel.
This minor recovery followed a steep 4% drop in prices during the previous session on the possibility of a ceasefire between Hezbollah and Israel. However, markets remain concerned about a potential Israeli strike on Iran’s oil infrastructure.
“The constant shift in Middle Eastern headlines, swinging between ceasefire discussions and escalated attacks, is distracting investors from focusing on oil market fundamentals,” said Priyanka Sachdeva, a senior market analyst at Phillip Nova, in an emailed statement.
Earlier, oil prices had surged by 8% for the week ending on Friday—marking the largest gain in over a year—following Iran’s missile strikes on Israel on October 1. However, Tuesday’s sell-off came as Hezbollah softened its stance on requiring a truce in Gaza as a precondition for a ceasefire in Lebanon. Hezbollah’s deputy leader, Naim Qassem, expressed support for a ceasefire without mentioning Gaza in a televised speech, which influenced market sentiment.
Meanwhile, China’s finance ministry is set to reveal details of fiscal stimulus plans at a highly anticipated news conference on Saturday. Investors are eagerly awaiting these measures to help boost China’s struggling economy, which could, in turn, revive oil demand. A press conference held by China’s state planner on Tuesday had disappointed markets by offering no substantial stimulus for economic growth.
Kelvin Wong, senior market analyst at OANDA, expects oil prices to move sideways in the short term, with WTI trading within a range of $73.15 to $78.30 per barrel. This outlook is contingent on announcements regarding China’s fiscal stimulus and ongoing developments in the Middle East.
On the demand side, data from the American Petroleum Institute showed U.S. crude oil inventories rose by nearly 11 million barrels last week—far exceeding analysts’ expectations. However, fuel stockpiles experienced a decline.
The overall demand outlook remains weak, with the U.S. Energy Information Administration (EIA) lowering its 2024 global oil demand growth forecast by 20,000 barrels per day to 103.1 million bpd, citing reduced industrial production and slower manufacturing growth in both the U.S. and China.