Oil Prices Stabilize as U.S. Stock Declines and Middle East Tensions Loom
Unexpected drop in U.S. crude inventories supports market, but uncertainties surrounding China and Israel keep risks alive.
Oil prices edged higher in early Asian trading on Thursday, recovering some of the steep losses from the previous two sessions, after industry data revealed an unexpected drop in U.S. crude inventories last week.
Brent crude futures increased by 45 cents, or 0.6%, to reach $74.67 per barrel at 0023 GMT. Similarly, U.S. West Texas Intermediate (WTI) crude futures rose by 45 cents, or 0.6%, to $70.84 per barrel.
So far this week, the benchmarks are down 6-7% following revised demand forecasts for 2024 and 2025 by the Organization of the Petroleum Exporting Countries (OPEC) and the International Energy Agency (IEA).
Additionally, prices have dropped as geopolitical risk premiums have diminished, with easing fears of an immediate retaliatory strike by Israel on Iran, which could have disrupted oil supplies. However, uncertainties remain regarding the ongoing conflict in the Middle East.
“We’re now in a waiting period for two key events. First, the Chinese NPC standing committee will need to provide details on the upcoming fiscal stimulus package, which I expect is on the way,” said Tony Sycamore, a market analyst at IG in Sydney.
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Investors are also looking for further information on China’s broad economic recovery plan, announced on October 12.
“The second factor is Israel’s eventual response to Iran. We know it’s coming, but the timing is still uncertain,” Sycamore added, noting that both developments pose potential upward pressure on oil prices.
In the U.S., crude oil and fuel stocks declined last week, according to market sources who referenced data from the American Petroleum Institute on Wednesday. This defied expectations of a stockpile increase.
Oil Prices Retreat While Weekly Gains Loom Amid Geopolitical Uncertainties
Crude inventories dropped by 1.58 million barrels for the week ending October 11, while gasoline stocks decreased by 5.93 million barrels, and distillate inventories fell by 2.67 million barrels, the sources reported anonymously.
A Reuters poll of ten analysts had projected an average increase of 1.8 million barrels in crude inventories for the same week.
The U.S. Energy Information Administration (EIA), the Department of Energy’s statistical arm, is scheduled to release its data at 11 a.m. EDT (1500 GMT) on Thursday.
Petroleum Prices Set to Increase from October 16 as Global Oil Rates Surge
Further supporting oil prices, the European Central Bank is expected to cut interest rates again on Thursday, marking its first consecutive rate cut in 13 years. The move signals a shift from controlling inflation in the eurozone to prioritizing economic growth.
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