Crude oil prices were headed for a weekly jump this week fueled by geopolitical concerns as Chinese demand prospects took a back seat for a while.
During the week, Israel continued its offense in Lebanon with calls intensifying for ceasefire talks, the latest coming from France, while the U.S. discussed an end of hostilities in Gaza with the Israeli government.
Oil traders are also awaiting Israel’s delayed response to the Iranian ballistic missile attack from earlier this month, even after Tel Aviv signaled it may not target oil infrastructure in Iran at the request of Washington.
“The uncertainty around how this plays out would leave speculators hesitant to be too short the market, something speculators had been before this most recent escalation, due to demand concerns and a bearish 2025 outlook,” ING analysts Warren Patterson and Ewa Manthey said in a note earlier this week.
“We remain of the view that the right price for crude oil currently is around $70 where it is now, as we await fresh price drivers, including the outcome of China’s NPC Standing Committee meeting as well as Israel’s response to Iran’s October 1 missile attack,” IG analyst Tony Sycamore wrote in a note as cited by Reuters.
However, “In the absence of new geopolitical developments, the path of least resistance for crude oil appears to be lower,” Rebecca Babin, a senior energy trader at CIBC Private Wealth Group, told Bloomberg on Thursday when prices booked a dip. “Demand concerns are driving the narrowing of spreads, while a generally bearish outlook for 2025 is keeping potential buyers on the sidelines.”
Speaking of demand, there was some positive news out of China on that, with the government raising the crude oil import quotas for private refiners by 6%. The increase comes after four years of no quota changes.
By Irina Slav for Oilprice.com