Oil prices opened Wednesday with tentative gains, rebounding from a significant decline experienced on Tuesday. The fluctuations in oil prices come as traders refocus their attention on the ongoing situation in the Middle East.
The downturn on Tuesday was influenced by disappointing data indicating that consumer prices in China had risen less than anticipated. This development raised concerns over weak consumer demand and coincided with the International Energy Agency’s (IEA) third consecutive downward revision of its global oil demand forecast for 2024.
In a related development, Israel communicated to the United States its intention not to target Iranian oil infrastructure during its retaliatory actions. This announcement initially removed the wartime premium that had been applied to oil prices. However, Israel later indicated that it would retain autonomy over its decisions regarding potential strikes on Iran, leaving room for speculation about possible changes to its strategy.
IG analyst Yeap Jun Rong commented on the market’s lack of bullish momentum, stating, “Prices still lack a bullish catalyst for now, as market participants fade the risks of disruptions in Middle East energy supplies, while China’s fiscal stimulus efforts seem to lack clarity.”
Last week, uncertainty surrounded whether Israel would target oil infrastructure in its retaliatory measures. ING analyst Warren Patterson noted that the impact on global oil markets would vary depending on whether Israel targeted upstream or downstream assets. An attack on upstream facilities could lead to immediate bullish effects, whereas damage to downstream assets, such as refineries, could be bearish since it would allow Iran to increase crude exports. Nonetheless, any Israeli strike on an Iranian refinery would likely escalate tensions and drive oil prices higher.
As traders await further information regarding China’s recent stimulus plans, the absence of specific details following a government update on Sunday has left many disappointed. This lack of clarity has prompted traders to sell oil, contributing to price pressures earlier in the week.
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