The prices of the oil were trading virtually stable on Wednesday as concerns that a conflict could spread in Middle East and threaten production in one of the world’s major oil producing regions fell slightly.
In morning trading, Brent crude futures were down 10 cents, or 0.1%, at $80.59 a barrel, while U.S. West Texas Intermediate crude futures were down 19 cents, or 0.2%, at $78.16 a barrel.
After hitting a seven-month low of $76.30 early last week, Brent rose more than 3% on Monday to cap a five-day winning streak, closing at $82.30 a barrel.
The conflict in the Middle East ceases
“The recent rally in crude oil came to a halt yesterday as prices retreated as fears of a retaliatory attack on Israel by Iran eased and the risk premium narrowed,” said Ashley Kelty, an analyst at Panmure Liberum.
Iran had promised a tough response to the killing of the Hamas leader late last month. Three senior Iranian officials have said that only a ceasefire agreement in Gaza would prevent Iran from taking direct retaliation against Israel for the killing.
For its part, Israel has neither confirmed nor denied his involvement, but is fighting in Loop against Hamas after the group attacked Israel in October. To counter Iran, The US Navy has deployed warships and a submarine to the Middle East.
“The extent of Iran’s retaliation, as well as Israel’s response, will likely determine whether the current conflict in the Middle East widens into a regional conflict,” said Vivek Dhar, an analyst at Commonwealth Bank of Australia.
Less demand by 2025
Another factor that also hindered the rise in oil prices was that the International Energy Agency (IEA) on Tuesday cut its estimate for oil demand growth through 2025, citing the impact of a weakening Chinese economy on consumption.
This came after the OPEC cut expected demand for 2024 for similar reasons where signs of healthier US demand had supported prices in earlier trading.
“He American Petroleum Institute reported a significant reduction in crude oil inventories USA of 5.2 million barrels, much more than the expected decline of 2 million. The data indicates that oil demand remains healthy,” said Danish Lim, investment analyst at Phillip Nova.
Source: Ambito
