Oil prices experience decline

10/1/2024 8:22:47 AM

(MENAFN) On Tuesday, oil prices experienced a decline as the market reacted to expectations of increased global supply and worries about slowing demand growth, overshadowing the ongoing conflicts in the Middle East—home to a significant portion of the world’s oil reserves.

The international benchmark brent crude dropped by 1.38 percent, reaching USD70.71 per barrel as of 11:20 a.m. local time (0820 GMT), down from the previous session's closing price of USD71.70. Similarly, the U.S. benchmark West Texas Intermediate (WTI) fell by 1.55 percent to USD67.11 per barrel after closing at USD68.17 the day before.

Earlier, both benchmarks had seen an uptick following Israel's intensified military actions against Hezbollah in Lebanon, which raised concerns that escalating conflicts in the region could disrupt crude oil supplies. Market participants have been closely monitoring whether the conflict might extend beyond its current borders, adding further uncertainty to oil availability.

However, these concerns regarding potential supply disruptions are being counterbalanced by the likelihood of increased production from the Organization of the Petroleum Exporting Countries (OPEC) and its allies, collectively known as OPEC+. According to Daniel Hynes, a commodity strategist at the Australia and New Zealand Banking Group, the group has been implementing significant output cuts since late 2022, currently reducing supply by approximately 5.8 million barrels per day.

"Despite its efforts to stabilize the oil market, prices have remained under pressure," Hynes noted in an email, adding that this situation raises questions about whether OPEC+ will continue with its current production constraints moving forward.

In addition to supply considerations, uncertainties surrounding demand in China, the world’s largest crude importer, have also weighed heavily on oil prices. Recent data indicated a troubling trend, as China's manufacturing activity contracted for the fifth consecutive month in September, further fueling concerns among market participants about future demand.

Overall, the combination of potential supply increases from OPEC+, along with demand uncertainties particularly in China, has created a complex environment for oil prices, prompting investors to navigate through both geopolitical tensions and economic indicators. As the situation evolves, market players will be closely watching developments in both the Middle East and global economic performance to gauge future trends in oil prices.

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