Oil prices rose for a second consecutive session as US crude inventories decreased, with market participants keeping a close watch on the Middle East for any signs of escalating tensions. Brent crude was trading near $73 per barrel after a 2% increase on Wednesday, while West Texas Intermediate (WTI) approached $69 per barrel. According to the Energy Information Administration, US stockpiles of crude oil, gasoline, and distillates, which include diesel, all experienced declines last week.
Earlier in the week, oil prices fell sharply following Israel’s limited retaliatory strike on Iran and renewed efforts to de-escalate the conflict with Hezbollah. However, Standard Chartered Plc cautioned that the market may be “relaxing too quickly” regarding the risks in the Middle East and the possibility of renewed hostilities.
Despite the recent price gains, the market continues to face bearish pressures stemming from sluggish demand in China and an oversupply situation. OPEC+ is set to begin increasing production in December, but industry consultant Rystad Energy indicated that the alliance is unlikely to ramp up output this year as producers are currently enjoying substantial profits.
“Trading logic is gradually shifting back to fundamentals, with geopolitical premiums becoming less significant,” noted Gao Jian, an analyst at Qisheng Futures Co., who added that the risks are skewed to the downside.
Next week, commodity and financial markets will be influenced by two pivotal events: the US presidential election and a meeting of China’s top legislative body. Investors will be particularly attentive to any announcements regarding additional stimulus measures aimed at revitalizing the Chinese economy, the world’s largest crude importer.
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