Oil prices steadied following a two-day decline, buoyed by expectations of a potential easing of hostilities in the Middle East. Brent crude was trading above $71 per barrel after dropping over 6% in the previous sessions, while West Texas Intermediate hovered around $67. Reports indicate that Israel is taking steps to resolve its conflict with Hezbollah by the end of the year, particularly after a recent retaliatory strike on Iran that spared oil and nuclear facilities.
As the war premium diminishes, market attention is shifting back to fundamental factors such as sluggish demand from China and an abundance of global supply. Traders are closely monitoring OPEC+’s strategy to gradually increase production starting in December, with opinions divided on whether the alliance will proceed with this plan.
“Market focus is centered on the reduction of the war premium and the potential production increase from OPEC+,” said Robert Rennie, head of commodity and carbon strategy at Westpac Banking Corp. He suggested that Brent crude could test the high $60s soon.
Additionally, commodity and financial markets are preparing for two significant events next week: the U.S. presidential election and a meeting of China’s top legislative body. Investors are particularly attentive to any stimulus measures aimed at revitalizing the Chinese economy, the world’s largest importer of crude oil.
In the U.S., crude stockpiles saw a decrease of 600,000 barrels last week, according to the American Petroleum Institute, which provided the information to Bloomberg. There were also declines in gasoline and distillate inventories, signaling tighter supply conditions.
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