Singapore: Oil prices edged higher in early Wednesday trading, driven by ongoing concerns over the Middle East conflict, following a sharp drop in the previous session. The market had reached its lowest level since early October due to weakening demand.
Brent crude oil futures increased by 14 cents, or 0.2%, to $74.39 a barrel by 0250 GMT, while U.S. West Texas Intermediate (WTI) crude futures rose by 19 cents, or 0.3%, to $70.77 per barrel.
On Tuesday, oil prices plunged over 4%, hitting a near two-week low after reports suggested that Israel would not target Iranian nuclear and oil sites, easing fears of a potential supply disruption. However, uncertainty persists, with concerns about a potential escalation in the conflict between Israel and the Iran-backed Hezbollah group continuing to weigh on the market.
The U.S. voiced opposition to the scope of Israel’s recent airstrikes in Beirut, further adding to geopolitical tensions.
“Following the recent retracement in prices, we may expect some room for prices to stabilise in the near term, as market participants reassess further developments on the geopolitical front,” said Yeap Jun Rong, a market strategist at IG.
Yeap also noted that the market is awaiting greater clarity on China’s fiscal policy, as the lack of specifics adds uncertainty to China’s oil demand outlook. Local media reported that China might raise an additional 6 trillion yuan ($850 billion) through special treasury bonds over the next three years to stimulate its weakening economy. However, this news did little to boost sentiment in the country’s stock market.
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On the demand side, the Organization of the Petroleum Exporting Countries (OPEC) and the International Energy Agency (IEA) both downgraded their forecasts for global oil demand growth in 2024, with much of the reduction attributed to China.
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Looking ahead, the market will focus on the latest U.S. oil inventory data. The American Petroleum Institute’s (API) weekly report is expected later on Wednesday, followed by the Energy Information Administration (EIA) data on Thursday. The reports are delayed by one day due to a federal holiday. Analysts surveyed by Reuters forecast that crude stockpiles rose by approximately 1.8 million barrels in the week ending October 11.
