Oil prices steadied in Asian trading on Wednesday as markets evaluated the ongoing conflict in the Middle East alongside bearish demand projections. Brent crude futures edged up by 22 cents, or 0.3%, to $77.4 per barrel by 0349 GMT, while U.S. West Texas Intermediate (WTI) futures gained 14 cents to reach $73.71 per barrel.
This follows a sharp 4% decline in prices the previous day, driven by the prospect of a ceasefire between Hezbollah and Israel. However, concerns over a possible Israeli strike on Iran’s oil infrastructure kept traders cautious.
The market sell-off on Tuesday came after a week-long rally, which started when Iran launched missile attacks on Israel on October 1. The surge culminated in an 8% weekly gain by Friday, the largest rise in over a year. On Tuesday, Hezbollah’s deputy leader, Naim Qassem, expressed support for a ceasefire in Lebanon without linking it to an end of the conflict in Gaza, marking a shift in stance.
On the demand side, U.S. crude oil stocks rose by nearly 11 million barrels last week, significantly exceeding analysts’ expectations, according to data from the American Petroleum Institute. However, fuel stockpiles showed a decline.
Adding to the weaker demand outlook, the U.S. Energy Information Administration (EIA) downgraded its 2024 global oil demand growth forecast by 20,000 barrels per day (bpd), to 103.1 million bpd, citing weaker industrial and manufacturing activity in the U.S. and China.
Concerns about the lack of additional stimulus from China to boost its economy further limited gains. At a press conference on Tuesday, Chinese officials revealed few new fiscal measures, disappointing market participants who had anticipated stronger economic support following substantial interventions in late September.
IG market strategist Yeap Jun Rong commented, “China’s inaction on new stimulus measures has dampened market sentiment. There was hope for further fiscal policy moves following the financial ‘bazooka’ in late September, but this announcement was clearly a step back.”
