Oil Prices Rebound: In a shift of fortunes, oil prices rebounded in Asian trading on Tuesday, recovering from a more than 3% drop in the previous session. These gains come as concerns over potential supply disruptions in the Middle East outweigh disappointing economic data from China.
The December Brent crude futures, which are set to expire on Tuesday, saw a rise of 0.74%, reaching $88.10 a barrel by 0637 GMT. Meanwhile, the more actively traded January Brent crude futures increased by 0.73% to reach $86.98. U.S. West Texas Intermediate crude also joined the upward trend, climbing 0.81% to $82.98.
On Monday, oil prices had experienced a downturn as investors exercised caution in anticipation of the upcoming U.S. Federal Reserve meeting, despite an escalation of Israel’s attacks on Gaza. Leon Li, an analyst at CMC Markets, pointed out, “Although it implemented a ground attack, it also retreated very quickly, and Iran is currently only resorting to verbal deterrence.” He emphasized that the situation could take a different turn if it escalates further and involves Iran, which could reintroduce concerns about tighter oil supply.
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In a note, ING analysts highlighted, “Disruptions to Iranian oil flows remain the most obvious risk to the market.” They estimated that lost supply could range between 500,000 barrels per day (bpd) and 1 million bpd if the United States were to strictly enforce sanctions once again. However, it’s worth noting that developments in the Middle East have yet to impact oil supply directly.
Meanwhile, in China, concerns emerged as weaker-than-expected data from the world’s second-largest oil consumer indicated fears of slowing fuel demand. The official purchasing managers’ index missed the forecast, slipping back below the 50-point level that separates contraction from expansion.
Election uncertainty raises concerns about Venezuelan crude shipments. The Supreme Court’s suspension of this month’s opposition presidential primary may determine whether the US eases sanctions. The U.S. eased sanctions in exchange for better 2024 elections.
As the market watches for further developments, the focus remains on the U.S. central bank meeting ending on Wednesday, despite the high likelihood that interest rates will remain unchanged, according to a poll by CME’s Fedwatch tool.