Oil prices stabilized during Asian trading on Wednesday as traders weighed the ongoing conflict in the Middle East against persistent bearish expectations for demand.
Brent crude futures edged up by 22 cents, or 0.3%, reaching $77.4 per barrel by 0349 GMT, while U.S. West Texas Intermediate futures saw a 14-cent rise to $73.71 per barrel.
This follows a sharp drop of over 4% in the previous session, driven by talks of a possible ceasefire between Hezbollah and Israel. However, markets remain cautious about the risk of an Israeli strike on Iran’s oil infrastructure.
“The daily uncertainty around Middle Eastern headlines, swinging between ‘ceasefire discussions’ and ‘escalation of attacks,’ has distracted investors from the core realities of the market. Oil trading has become dominated by sentiment, with investors ‘buying the rumor’ while ignoring key fundamentals,” commented Priyanka Sachdeva, senior market analyst at Phillip Nova, in an email.
Tuesday’s sell-off came after a price surge that began when Iran fired missiles at Israel on October 1, leading to an 8% weekly gain by Friday, the largest weekly rise in over a year.
Meanwhile, on Tuesday, Hezbollah officials appeared to back away from requiring a ceasefire in Gaza as a condition for halting hostilities in Lebanon. In a televised speech, Hezbollah’s deputy leader Naim Qassem supported efforts for a truce, notably omitting the need for the war in Gaza to end as a precondition.
On the demand side, U.S. crude oil inventories surged by nearly 11 million barrels last week, significantly surpassing analysts’ expectations, according to sources citing American Petroleum Institute data on Tuesday. However, fuel stockpiles declined.
Weak demand continues to shape the market’s fundamental outlook. The U.S. Energy Information Administration (EIA) downgraded its 2024 global oil demand growth forecast by 20,000 barrels per day (bpd), reducing it to 103.1 million bpd, citing sluggish industrial and manufacturing growth in the U.S. and China.
Additionally, concerns over the lack of new economic stimulus from Beijing are dampening oil market gains. Chinese officials revealed little in the way of new measures during a press conference on Tuesday.
“China’s role in the market is significant, and the absence of fresh stimulus is disappointing. Many were hoping that fiscal policies would follow the ‘financial bazooka’ delivered in late September, but yesterday’s announcement showed a clear step-down,” said Yeap Jun Rong, market strategist at IG.
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