By Adedapo Adesanya
The oil market fell on Tuesday as traders’ worries about the potential for a wider war in the Middle East eased, with Iran yet to act on threats to retaliate on Israel as expected since last week.
Yesterday, Brent crude futures went down by $1.61 or 1.96 per cent to close at $80.69 a barrel and the US West Texas Intermediate (WTI) crude futures declined by $1.71 or 2.14 per cent to settle at $78.35 a barrel.
Analysts noted that the markets had priced in an imminent attack by Iran against Israel within 24 to 48 hours but since that did not happen, it is taking that risk premium out of the price for crude.
A wider conflict appeared less possible as Iran proposed holding fresh cease-fire negotiations with Hamas to avoid reprisals. Still, an escalation in the Middle East may jeopardise the supply of crude from one of the major oil-producing regions.
The US has since prepared for what could be significant attacks by Iran or its proxies in the region.
The International Energy Agency (IEA) kept its 2024 global oil demand growth forecast unchanged but trimmed its 2025 estimate, citing the impact of lacklustre Chinese consumption on economic growth.
This is after the Organisation of the Petroleum Exporting Countries (OPEC) cut expected demand in 2024 even though the group and its allies, known as OPEC+, aim to raise output from October. Some of that upward momentum has been dampened by OPEC’s tardy admission that the demand rise in 2024 will not be as strong as they had been hinting at for months.
The cartel cut its forecast for global oil demand growth in 2024 on the back of weaker-than-expected H1 data and a slacker outlook for China, predicting 2.11 million barrels per day year-over-year growth, down 140,000 barrels per day from the previous forecast.
As a result of Ukraine’s encroachment into Russian territory, which includes parts of the Kursk region and the area around the important pipeline station in Sudzha, natural gas prices in Europe have risen to an all-time high this year.
Crude oil inventories in the US fell this week, by 5.205 million barrels for the week ending August 9, according to The American Petroleum Institute (API), after analysts predicted a smaller 2 million barrel dip. For the week prior, the API reported a 180,000-barrel increase in crude inventories.
So far this year, crude oil inventories are close to where they were at the start of the year, having increased by 400,000 barrels, according to API data.
The market will expect the official data from the US Energy Information Administration (EIA) later on Wednesday, just as it will get US consumer price index report that will give a crucial read on inflation.