Oil prices rose for the second consecutive session on Thursday as U.S. crude inventories posted a decline, and traders kept a close eye on geopolitical tensions in the Middle East. Brent crude neared $73 per barrel after a 2% gain on Wednesday, while West Texas Intermediate (WTI) moved just above $69 per barrel. The rise followed data from the U.S. Energy Information Administration showing reductions in crude, gasoline, and distillate stockpiles, which include diesel.
This uptick comes amid heightened uncertainty in the Middle East. After an initial dip earlier this week due to Israel’s limited strike on Iran and efforts to de-escalate the conflict with Hezbollah, oil markets have stabilized. Analysts, however, warn against downplaying regional risks. “The market has relaxed too quickly over Middle East risks and the potential resumption of hostilities,” cautioned Standard Chartered Plc.
Bearish Pressures on Oil Prices
Despite Middle East concerns, bearish factors like sluggish demand from China and a stable oil supply are tempering the bullish outlook. With OPEC+ slated to begin ramping up production in December, some analysts remain cautious about a prolonged price increase. Rystad Energy, an industry consultancy, noted that the cartel is unlikely to boost production in the near term, as producers are “making huge money” from current pricing levels.
“Trading logic is gradually returning back to fundamentals, with geopolitical premiums getting marginalized,” remarked Gao Jian, an analyst at Qisheng Futures Co. He added that risks are skewed to the downside, given China’s demand outlook.
Upcoming Events to Influence Markets
Oil markets are also bracing for two major upcoming events: the U.S. election and a key meeting of China’s legislative body next week. Investors are watching for potential economic stimulus measures from China, the world’s largest crude importer, that could impact global demand. Additionally, the U.S. election outcome may influence the direction of energy policy, adding further volatility to oil prices.
As the market absorbs these factors, oil traders remain watchful, balancing fundamental supply and demand signals against geopolitical uncertainties.
