Oil Prices Steady as Supply Outlook Offsets Middle East Tensions

Oil prices remained relatively unchanged on Tuesday as prospects of stronger supply and sluggish global demand growth balanced concerns over potential disruptions from escalating tensions in the Middle East.

Key Price Movements:

• Brent Crude: December delivery edged up 13 cents (0.18%) to $71.83 a barrel as of 0615 GMT.
• West Texas Intermediate (WTI): November delivery increased by 14 cents (0.21%) to $68.31 a barrel.

Recent Price Trends:

• Brent crude futures experienced a 9% drop in September, marking the third consecutive month of declines and the largest monthly fall since November 2022. It also witnessed a 17% decline in the third quarter, the biggest quarterly loss in a year.
• WTI recorded a 7% drop in September and a 16% quarterly decline.

China’s Economic Activity

China’s manufacturing activity contracted significantly in September due to a decline in both domestic and international orders, as shown in a private-sector survey. This decline dampened factory owners’ confidence to near-record lows. Analysts expect recent stimulus measures to potentially boost China’s 2024 growth back to about 5%, but they remain skeptical about altering the long-term outlook.

OPEC+ Output Plans

Adding to supply concerns, OPEC+ (including OPEC members and allies like Russia) is scheduled to increase output by 180,000 barrels per day in December, contributing to the perception of stronger supply in the market.

Middle East Tensions

Israel launched “limited” raids against Hezbollah targets on the Lebanese border, marking the potential beginning of a ground invasion. These actions follow the killing of Hezbollah leader Hassan Nasrallah by Israel on Friday, escalating the conflict between Israel and Iran-backed militants, which could draw in the U.S. and Iran.

U.S. Stockpile Expectations

In the United States, crude oil and fuel inventories are anticipated to have decreased by about 2.1 million barrels in the week ending September 27, according to a preliminary Reuters poll. Market participants are awaiting the American Petroleum Institute (API) report, due later on Tuesday at 4:30 p.m. EDT (2030 GMT), for further insights on U.S. oil supply levels.

Outlook

Despite escalating Middle East tensions, supply fears remain relatively contained, with market participants still assessing the likelihood of a broader regional conflict.