Oil Prices Stabilize Amid Middle East Tensions and Weak Economic Data
Focus on Middle East Conflict
Oil prices have stabilized after experiencing sharp losses in the previous session. Traders are closely monitoring the ongoing conflict between Israel and Hamas, as developments in this war continue to impact the market. By 09:05 ET (13.05 GMT), futures traded 0.1% lower at $85.44 a barrel, while the contract remained largely unchanged at $89.82.
Conflict in Gaza Remains a Concern
The benchmarks saw a significant drop of around 3% on Monday as hopes for a deescalation in the conflict rose following diplomatic missions to Israel and Gaza and Hamas agreeing to release some hostages. However, Israel continued its bombardment of Gaza on Monday, leaving the situation highly fluid. The market remains divided on whether the conflict will ease or intensify, potentially involving other countries in the oil-rich region.
Weakening Economic Picture in Europe
In addition to the Middle East tensions, weak economic data in Europe is also influencing oil demand. Germany, the dominant economy in the eurozone, has experienced a contraction for the fourth consecutive month. This suggests that a recession is well underway. Similar trends have been observed in the eurozone as a whole, while businesses in Britain reported further declines this month, adding to the decision-making challenges for the Bank of England ahead of its interest rate decision next week. The United States’ equivalent data is expected to be released later in the session.
Global Oil Demand and Transition to Cleaner Energy
The International Energy Agency (IEA) published its annual World Energy Outlook, projecting a peak in global oil demand around 102 million barrels per day by the late 2020s. The IEA anticipates a subsequent decline in volumes due to the transition to cleaner energy, particularly in the transport sector. Additionally, the European Union is on track to reduce its reliance on Russian fossil fuels within this decade.
Impending Inventory Data and Conclusion
The American Petroleum Institute (API), an industry group, will release its latest estimate of U.S. inventories later in the session. Expectations are that crude stockpiles have increased, while distillate and gasoline inventories have fallen. Official data from the U.S. Department of Energy’s statistical arm, the Energy Information Administration (EIA), is due on Wednesday. As the market remains on edge, the focus continues to be on further developments in the Middle East and global economic indicators.
