Oil little changed as demand worries offset Mideast fears

Economy

1-10-2024, 08:23

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INA- SOURCES

Oil prices were little changed on Tuesday as stronger supply prospects and tepid global demand growth outweighed worries that escalating tensions in the Middle East could impact output from the key exporting region.

Brent crude futures for December delivery edged up 7 cents, or 0.1%, to $71.77 a barrel as of 0335 GMT. U.S. West Texas Intermediate crude futures for November delivery gained 8 cents, or 0.12%, to $68.25.

On Monday, Brent futures ended September down 9%, its third month of declines and largest monthly drop since November 2022. It slumped 17% in the third quarter for its biggest quarterly loss in a year. WTI fell 7% last month and dropped 16% for the quarter.

"There have been a lot of reservations in place for oil prices, as market participants look towards upcoming supply additions from OPEC+ by the end of this year, alongside a still-soft demand outlook from China reflected in the country’s latest PMI numbers," said Yeap Jun Rong, market strategist at IG.

"That said, sentiments have been less sensitive to the weaker data, finding room to stabilise on the hopes that recent raft of stimulus may help to jumpstart the economy ahead," said Yeap.

China's manufacturing activity shrank sharply in September as new orders at home and abroad cooled, pulling down factory owners' confidence to near record lows, a private-sector survey showed on Monday.

Analysts say a slew of stimulus measures over the last week are likely to be enough to bring China's 2024 growth back to about 5% after below-forecast data in the past several months cast doubts over that target, but will hardly change the long-term outlook.

Alongside the demand concerns, OPEC+, which groups OPEC members and allies such as Russia, is scheduled to raise output by 180,000 barrels per day in December.

Meanwhile, tensions in the Middle East remain on the radar, but supply fears seem relatively contained for now, with market participants still pricing out the risks of a wider regional conflict, said IG's Yeap.

Israel's widely expected ground invasion of Lebanon appeared to be getting underway early on Tuesday as its military said troops had begun "limited" raids against Hezbollah targets in the border area.

The attacks follow Israel's killing on Friday of Hezbollah head Hassan Nasrallah, and represents an escalating conflict in the Middle East between Israel and Iran-backed militants that now threatens to suck in the U.S. and Iran.

In the U.S., crude oil and fuel stockpiles were expected to have fallen last week by about 2.1 million barrels in the week to Sept. 27, a preliminary Reuters poll showed on Monday.

The poll was conducted ahead of a report from the American Petroleum Institute industry group due at 4:30 p.m. EDT (2030 GMT) on Tuesday.

SOURCE: REUTERS