Oil rally slows as investors await Israel’s response
Oil prices paused on Tuesday as the market awaits Israel’s response to last week’s Iranian rocket attacks, which had caused a surge in prices due to fears of a broader conflict in the Middle East.
Both benchmark contracts saw gains of more than 3% on Monday, reaching their highest levels since late August, and building on an 8% rally from the previous week—the largest weekly increase in over a year—amid concerns that ongoing hostilities could disrupt oil supplies from the region.
By 1218 GMT, Brent crude futures had dropped $1.60, or 2%, to $79.33 per barrel, while U.S. West Texas Intermediate futures fell $1.60, or 2.07%, to $75.54 per barrel. On Monday, Brent had surpassed $80 per barrel for the first time since August.
“While short-term upward pressure is likely to persist until there’s clarity on Israel’s next steps, the decline in Brent shows that a sustained rise above $80-82 per barrel will encounter resistance due to uncertainties in demand and oversupply dynamics,” said Gaurav Sharma, an independent oil analyst in London.
The price rally began following Iran’s missile barrage on Israel on October 1, with Israel pledging to retaliate and considering Iranian oil facilities as potential targets.
“Oil can only rise so much based on perceptions without actual supply disruptions… While it’s premature to say that tensions have eased regarding Iran’s involvement in the conflict, the threats of Israeli strikes on Iranian oil infrastructure have yet to materialize,” remarked Tamas Varga from oil brokerage PVM.
However, some analysts expressed skepticism about an attack on Iranian oil facilities, cautioning that oil prices could face significant downward pressure if Israel shifts its focus elsewhere.
China also captured attention on Tuesday after it expressed “full confidence” in meeting its annual growth target but chose not to implement stronger fiscal measures, disappointing investors who had hoped for more economic support.
“Oil prices are under pressure due to a risk-off sentiment, likely stemming from disappointment over the recent announcement regarding Chinese stimulus measures,” noted Giovanni Staunovo, an analyst at UBS.
Concerns about slow growth dampening fuel demand in China, the world’s largest crude importer, weighed on the market.
In the U.S., Hurricane Milton intensified into a Category 5 storm en route to Florida, prompting the shutdown of at least one oil and gas platform in the Gulf of Mexico on Monday.
Traders are also anticipating the latest U.S. crude oil inventory data, with analysts projecting an increase of 1.9 million barrels for the week ending October 4, according to a preliminary Reuters poll.
The American Petroleum Institute is set to release its stockpile figures on Tuesday, followed by the official report from the Energy Information Administration on Wednesday
