By Yuka Obayashi
Oil prices took a dip on Tuesday, following a 2% increase the day before, as the top U.S. diplomat works towards a ceasefire in the Middle East. Slow demand in China, the world’s largest oil importer, also continues to impact the market.
Oil futures for December delivery were down 26 cents at $74.03 a barrel, while U.S. West Texas Intermediate crude futures for November delivery dropped 2 cents to $70.54 a barrel on the contract’s last day as the front month.
The more active WTI futures for December lost 23 cents to $69.81 per barrel.
Both Brent and WTI saw a nearly 2% increase on Monday, bouncing back from last week’s 7% decline. Ongoing conflict in the Middle East, particularly concerns about potential disruptions to oil supply due to Israel’s expected retaliation against Iran, have kept the market on edge.
“Oil prices have been reacting to mixed news from the Middle East, with the situation constantly changing between escalation and de-escalation,” said Satoru Yoshida, a commodity analyst with Rakuten Securities.
While the market could see gains with clearer signs of China’s economic recovery supported by stimulus measures from Beijing and improvements in the U.S. economy post interest rate cuts, uncertainties about the global economic outlook are likely to limit these gains.
U.S. Secretary of State Antony Blinken visited the Middle East on Monday to revive talks to end the Gaza war and address the conflict spillover in Lebanon.
China, on the other hand, reduced benchmark lending rates as expected during the monthly fixing on Monday, following previous reductions in policy rates last month as part of efforts to stimulate the economy.
Despite recent stimulus measures, China’s oil-demand growth is projected to remain weak in 2025 as the country shifts towards electrifying its car fleet and experiences slower economic growth, according to the head of the International Energy Agency.
On the flip side, Saudi Aramco remains optimistic about China’s oil demand, especially with the government’s stimulus package aimed at boosting growth, as stated by the head of the state-owned oil giant.
Overall, the fluctuating oil prices, driven by geopolitical tensions and economic factors, have significant implications for global markets and individual investors. It’s essential for investors to stay informed about these developments and consider diversifying their portfolios to mitigate risks associated with oil price fluctuations.
