Oil is losing 4.5% in price on Monday, as the market assesses news from the Middle East.
As reported, on the night of October 26, Israel launched a series of air strikes on Iranian military targets. The attack was Israel’s response to the strike on the country by Iranian forces on October 1.
The fact that Israel did not attack Iran’s oil facilities, as well as the smaller-than-expected scale of the attack in general, eased traders’ fears of a possible escalation of the conflict, Market Watch notes.
“Israel’s attack did not affect energy infrastructure and was limited in scope. This is likely to ease fears of a direct conflict with Iran,” said Jay Hatfield, CEO of Infrastructure Capital Advisors.
The cost of December futures for Brent on the London ICE Futures exchange as of 7:15 a.m. is $72.63 per barrel, which is $3.42 (4.5%) lower than at the close of the previous trading. On Friday, these contracts rose by $1.67 (2.3%) to $76.05 per barrel.
December futures for WTI in electronic trading on the New York Mercantile Exchange (NYMEX) fell by $3.34 (4.65%) to $68.44 per barrel. At the end of the previous session, the value of these contracts increased by $1.59 (2.3%) to $71.78 per barrel.
Price Futures Group analyst Phil Flynn notes, however, that the oil market’s concerns about the Middle East conflict will persist.
“The bottom line is that the immediate threat of oil supply disruptions from the region has passed. However, if you think this will put an end to the conflict, I don’t think so. Even if Iran doesn’t respond to this strike, I think it will try to make sure that its proxies regroup and respond one way or another,” the Market Watch expert said.
Oil prices rose on Friday for the third consecutive session and ended the week in the black for the first time in a month.
Market participants are trying to assess the impact of Hurricane Frances, which hit the Louisiana coast on Wednesday night. According to official figures, about 39% of US production facilities in the Gulf of Mexico were shut down due to the weather.
“The impact of the hurricane is still not fully known as the affected regions assess the damage to infrastructure,” said Schneider Electric analyst Robbie Fraser. Usually, offshore oil production recovers quite quickly after such events, the expert said, as quoted by Market Watch.
The cost of November futures for Brent on the London ICE Futures exchange as of 8:25 a.m. is $72.43 per barrel, which is $0.48 (0.67%) higher than at the close of the previous trading. On Thursday, these contracts rose by $1.36 (1.9%) to $71.97 per barrel.
October futures for WTI in electronic trading on the New York Mercantile Exchange (NYMEX) increased in price by $0.48 (0.7%) to $69.45 per barrel. As a result of the previous session, the cost of these contracts increased by $1.66 (2.5%) to $68.97 per barrel.
Since the beginning of this week, Brent has risen in price by 2%, WTI – by 2.6%.
The growth of the oil market is constrained by concerns about the prospects for global demand.
On Thursday, the International Energy Agency (IEA) lowered its estimate of global oil demand growth in 2024 by 67 thousand barrels per day compared to last year, to 903 thousand bpd from the previously expected 970 thousand bpd.
Commenting on the forecast of a slowdown in demand growth this year, analysts noted the adjustment of expectations for oil consumption in China. Now the IEA expects that oil demand in China will grow by only 180 thousand bpd in 2024, to 16.7 million bpd. At the same time, at the beginning of the year, this parameter was estimated at 700 thousand bpd, and last month – about 300 thousand bpd.
Benchmark oil prices are rising in the morning on the last working day of summer.
The cost of October futures for Brent on the London ICE Futures exchange as of 8:08 a.m. on Friday is $80.18 per barrel, which is $0.24 (0.3%) higher than at the close of the previous trading. The day before, these contracts rose in price by $1.29 (1.6%) to $79.94 per barrel.
October futures for Brent will expire at the end of the session on Friday. November contracts, which are more actively traded, are rising in price during trading by $0.22 (0.28%) to $79.04 per barrel.
October futures for WTI in electronic trading on the New York Mercantile Exchange (NYMEX) increased in price by $0.18 (0.24%) to $76.09 per barrel. On Thursday, the contract rose by $1.39 (1.9%) to $75.91 per barrel.
The quotes are supported by tensions in the Middle East. In particular, Israeli Air Force fighters struck several Hezbollah rocket launchers in southern Lebanon that threatened Israel, the Israel Defense Forces (IDF) press service said in a telegram channel.
Another positive factor for the oil market was the statistical data released the day before, which confirmed the stability of the US economy. The estimate of the country’s GDP growth in the second quarter was revised upward to 3% in terms of annualized rates from the previously announced 2.8%.
The rise in oil prices intensified on Friday afternoon in anticipation of a speech by Federal Reserve Chairman Jerome Powell.
Quotes for October futures for Brent on the London ICE Futures exchange by 14:41 by the quarter increased by $1.16 (1.5%) to $78.38 per barrel.
The price of WTI futures for October in electronic trading on the New York Mercantile Exchange (NYMEX) increased by $1.22 (1.67%) to $74.23 per barrel by the specified time.
The day before, both brands rose by 1.5%.
The quotes are supported by expectations of a reduction in the key interest rate in the United States. High rates increase the cost of debt service, which could slow economic activity in the country and reduce demand for fuel.
“The dollar is falling on expectations of a rate cut,” said John Kilduff, partner at Again Capital. – “Everyone is now talking about an upcoming 50 basis point cut in the Fed Funds rate, which would be a significant step.
The market expects to receive new signals about the Fed’s position from Powell’s speech at the annual economic symposium in Jackson Hole, which begins at 17:00 CET.
On Monday, benchmark crude oil prices rose for the fifth consecutive trading session due to fears of possible supply disruptions due to the escalating conflict in the Middle East.
“Tensions in the Middle East, which could escalate at any time and push prices up further, are providing support,” said Barbara Lambrecht, commodities analyst at Commerzbank. According to her, “geopolitical risks are likely to continue to have a significant impact on oil price trends” this week, MarketWatch reports.
In addition, last week’s US statistics were better than expected, which calmed concerns about a possible recession in the country’s economy, Trading Economics writes. They also confirmed traders’ confidence that the Federal Reserve will cut interest rates next month. This may help to increase demand for fuel.
Quotations for October futures for Brent on the London ICE Futures exchange as of 8:01 a.m. amounted to $79.88 per barrel, which is $0.22 (0.3%) higher than the level at the close of the previous trading. On Friday, these contracts rose by $0.5 (0.6%) to $79.66 per barrel.
September futures for WTI in electronic trading on the New York Mercantile Exchange (NYMEX) are up $0.36 (0.5%) to $77.2 per barrel in the morning. At the end of the previous session, the price of these contracts increased by $0.65 (0.9%) to $76.84 per barrel.
Last week, the price of Brent rose by 3.7%, and WTI by 4.5%. Thus, oil finished the first week of five in the black.
Prices for benchmark crude oil continue to rise on the back of data showing a decline in US fuel stocks for the third week in a row.
Such a long period of decline was last seen in September last year.
The drop in oil reserves exceeded market expectations.
In addition, recent statements by representatives of the Federal Reserve System have increased expectations that the US central bank will cut its base rate in September. This will boost economic growth and, accordingly, lead to an increase in demand for energy resources, Trading Economics writes.
Quotations of September futures for Brent on the London ICE Futures exchange by 8:05 a.m. rose by $0.37 (0.4%) to $85.45. On Wednesday, these contracts rose by $1.35 (1.6%) to $85.08 per barrel.
Prices for August futures for WTI in electronic trading on the New York Mercantile Exchange (NYMEX) on Thursday morning increased by $0.57 (0.7%) to $83.42 per barrel.
At the end of the previous session, these contracts rose by $2.09 (2.6%) and ended trading at $82.85 per barrel.
Commercial oil inventories in the United States last week decreased by 4.87 million barrels, the country’s Energy Ministry reported.
Gasoline reserves increased by 3.33 million barrels, distillate reserves – by 3.45 million barrels.
Experts had expected an increase in oil reserves by 0.8 million barrels, as well as a decrease in gasoline reserves by 1.7 million barrels and distillate reserves by 0.5 million barrels, according to Trading Economics.
Analysts surveyed by S&P Global Commodity Insights had forecast an increase in oil reserves by 0.54 million barrels and a decrease in gasoline and distillate reserves by 0.7 million barrels and 0.59 million barrels, respectively.
