Oct 1 2024: Oil prices remained relatively unchanged on Tuesday as concerns about weak global demand and increased supply prospects balanced against fears that rising tensions in the Middle East could disrupt output from the region.
Brent crude futures for December delivery rose slightly by 13 cents, or 0.18%, to $71.83 per barrel by 06:15 GMT. U.S. West Texas Intermediate (WTI) crude futures for November delivery inched up 14 cents, or 0.21%, to $68.31 per barrel.
On Monday, Brent crude concluded September with a 9% drop, marking its third consecutive monthly decline and the largest since November 2022. The commodity fell 17% over the third quarter, its steepest quarterly loss in a year. Meanwhile, WTI slid 7% in September and recorded a 16% quarterly decline.
Market strategist Yeap Jun Rong from IG noted that oil prices have faced significant pressure as participants anticipate additional supply from OPEC+ by the end of the year, coupled with a subdued demand outlook from China, particularly reflected in the country’s recent Purchasing Managers’ Index (PMI) data.
However, Yeap pointed out that sentiment has shown resilience, with hopes that China’s recent stimulus measures could help revitalize its economy in the coming months.
China’s manufacturing activity experienced a sharp contraction in September, as both domestic and international orders weakened, causing factory owners’ confidence to drop to near record lows. While recent stimulus measures could support China’s 2024 growth target of around 5%, analysts suggest they are unlikely to alter the country’s longer-term economic outlook.
Adding to the uncertainty, OPEC+ is expected to increase output by 180,000 barrels per day in December.
On the geopolitical front, Israel’s anticipated ground offensive into Lebanon seemed to be underway early Tuesday, with the military confirming limited raids targeting Hezbollah positions near the border. Despite these developments, market participants have yet to fully factor in the risks of a broader regional conflict, according to Yeap.
Tensions have escalated in the Middle East following Israel’s assassination of Hezbollah leader Hassan Nasrallah on Friday, fueling fears of a wider conflict involving Iran-backed militants, Israel, the U.S., and Iran.
In the U.S., crude oil and fuel stockpiles are expected to have fallen by approximately 2.1 million barrels for the week ending September 27, based on a preliminary Reuters poll conducted on Monday. The poll results come ahead of the American Petroleum Institute’s official report, due at 4:30 p.m. EDT (2030 GMT) on Tuesday.
