Oil prices rose for a second session after U.S. crude inventories fell, with the market monitoring the Middle East for any potential escalation.
Brent crude was trading near $73 a barrel after rising 2% on Wednesday, while West Texas Intermediate crude rose to around $69 a barrel. U.S. stockpiles of crude oil, gasoline and distillates — a category that includes diesel — fell last week, according to data from the Energy Information Administration.
Oil prices fell at the start of the week after Israel’s limited retaliatory strike on Iran and renewed efforts to end the conflict with Lebanon’s Hezbollah. However, the market relaxed too quickly about Middle East risks and the possibility of renewed hostilities, according to Standard Chartered Bank.
However, the market faces downward headwinds from slowing Chinese demand and ample supply. The OPEC+ alliance is set to start increasing output from December, although industry consultant Rystad Energy said the alliance is unlikely to boost output this year because producers are making huge amounts of money.
The trading logic is gradually returning to market fundamentals, with geopolitical premiums being sidelined, said Gao Jian, an analyst at Qisheng Futures, adding that risks are tilted to the downside.
Commodities and financial markets are witnessing two crucial events next week that could lower prices: the US elections and a meeting of China’s top legislature, as investors look for additional stimulus efforts to revive Beijing’s economy. The Asian country is the world’s largest importer of crude oil.
