Market Analysis

The market watches the Middle East as oil declines on rising US crude reserves

Amos Simanungkalit · 23 Oct 20247.7K Views

Oil prices declined on Wednesday following industry reports indicating that U.S. crude inventories rose more than anticipated. Despite this drop, crude futures have increased by approximately 3% this week as traders continue to consider the ongoing conflict in the Middle East.

Brent crude futures fell by 73 cents, or 1%, reaching $75.31 a barrel by 0917 GMT. Similarly, U.S. West Texas Intermediate crude futures decreased by 74 cents, also down 1%, to $71.00 a barrel.

In the previous two sessions, oil prices had risen, recovering from losses exceeding 7% experienced the prior week. These declines were largely driven by concerns about demand from China and some alleviation of fears regarding potential disruptions to Middle Eastern oil supply.

The latest price decrease followed data revealing a 1.64 million barrel increase in U.S. crude stocks last week, according to sources citing figures from the American Petroleum Institute. This was significantly higher than the 300,000 barrel increase anticipated by analysts surveyed by Reuters.

The official U.S. government oil inventory report is scheduled for release on Wednesday at 10:30 a.m. EDT (1430 GMT).

However, the effect of rising inventories on prices was tempered by persistent worries over potential threats to oil supply due to the ongoing conflict in the Middle East.

Analysts from ING noted that the market is still awaiting Israel's response to Iran's missile attack, suggesting that Tuesday’s price increase might have been influenced by the lack of a resolution following U.S. Secretary of State Antony Blinken's recent visit to Israel. During this visit, Blinken engaged in extensive discussions with Israeli Prime Minister Benjamin Netanyahu and other senior officials, emphasizing the need for increased humanitarian aid to Gaza, according to a senior State Department official.

On Tuesday, Israel confirmed the elimination of Hashem Safieddine, the potential successor to the late Hezbollah leader Hassan Nasrallah, who was killed in an Israeli attack on the Iran-supported Lebanese militant group last month.

Market strategist Yeap Jun Rong from IG noted that investors are factoring in the possibility of the Middle Eastern conflict persisting, with any ceasefire agreements potentially facing delays.