Oil prices retreat on easing supply, geopolitical woes

Tuesday’s closing price of WTI crude oil was $81.18 per barrel, the lowest in two months, as concerns over a growing war faded and traders’ focus was largely directed towards the recent economic data out of the Eurozone.

Tuesday saw an improvement in oil prices as investors became less concerned about possible supply disruptions resulting from the conflict in the Middle East and from data indicating increased output from both OPEC and the US.

Before they expire later on Tuesday, December delivery of Brent crude futures settled 4 cents lower at $87.41 per barrel. January’s more actively traded contract dropped $1.33, or 1.4%, to $85.02.

December delivery of US West Texas Intermediate crude saw a 1.6% decline of $1.29 to $81.02, while January delivery saw a 1.8% decline to $80.50.

Although prices rose by as much as $1 during the trading session, the price of a barrel is still below $90. According to a Hamas spokesman, several foreign prisoners will be freed in the next few days.

Some of the war premium has been subtracted from prices by the markets. A Reuters survey indicates that OPEC’s crude output increased by 180,000 barrels per day (bpd) in October, mostly due to Nigeria and Angola.

According to the Energy Information Administration, US field production of crude oil reached a new monthly record in August at 13.05 million barrels per day.

China is the world’s second-largest oil consumer, and weaker-than-expected manufacturing and non-manufacturing activity data raised concerns about fuel demand slowing down there.

According to Eurostat’s flash estimate, October’s eurozone inflation dropped to 2.9% from 4.3% in September, the lowest level in two years. Thus, it is unlikely that the European Central Bank (ECB) will raise interest rates soon.

Unless the Israel-Hamas conflict attracts more Middle Eastern nations and intensifies supply constraints, modest global economic growth will keep crude prices anchored below $90 per barrel this year and next, according to a Reuters poll released on Tuesday.

Investors continued to be cautious about the possibility of other nations joining the fight. Although events in the Middle East have not yet had an impact on oil, the likelihood of Iran becoming involved in the ground invasion is growing, which is contributing to worries about a tight supply.

As Israeli forces attacked Hamas in the network of tunnels beneath the Palestinian exclave, Israeli Prime Minister Benjamin Netanyahu rejected calls for a ceasefire to ease a humanitarian crisis.

According to a poll conducted by CME’s Fedwatch tool, analysts anticipate that the US Federal Reserve will keep interest rates unchanged at its meeting, which ends on Wednesday.