Oil futures regained some ground on Wednesday, reversing part of their recent declines as geopolitical unrest intensified following Israel’s military response to Hezbollah. Despite this rebound, prices continued to be under strain due to persistent concerns about demand in China.
Brent crude futures increased by 39 cents, or 0.5%, reaching $79.02 per barrel by 0020 GMT. The more actively traded October contract saw a rise of 47 cents, standing at $78.54. Meanwhile, U.S. West Texas Intermediate (WTI) crude futures climbed 52 cents, or 0.7%, to $75.25 per barrel. Both Brent and WTI had fallen approximately 1.4% the previous day, marking their lowest levels in seven weeks.
The escalation in the Middle East came after Israel claimed responsibility for an airstrike in Beirut that killed a senior Hezbollah commander. This retaliation followed a cross-border rocket attack by Hezbollah on Israel on Saturday. The recent escalation occurred despite ongoing diplomatic efforts by U.S. and UN officials to prevent a broader conflict in the region.
Despite the current rebound, Brent and WTI are set to record their largest monthly losses since 2023 by the end of July. The decline in oil prices has been fueled by ongoing worries over China’s demand outlook, optimism for a ceasefire in Gaza, and the expectation that the upcoming OPEC+ meeting will not significantly alter its plan to begin unwinding production cuts from October, according to IG analyst Tony Sycamore.
OPEC+ ministers, including those from Russia, are scheduled to hold an online Joint Ministerial Monitoring Committee (JMMC) meeting on Thursday at 1000 GMT. The committee is anticipated to maintain its current production cut agreement and proceed with planned reductions starting in October, despite the recent downturn in oil prices.
Sycamore noted that WTI crude oil remains below the 200-day moving average of $78.66, suggesting potential further declines towards the $74.20 to $74.00 range. A sustained drop below $74 could potentially lead prices towards $70.
The global oil market is also being impacted by weakening fuel demand in China, the largest importer of crude oil and a major driver of global demand growth. China’s official purchasing managers’ index (PMI) data, set for release on Wednesday, is expected to indicate a contraction in factory activity for the third consecutive month in July.
