Oil Prices Set for Third Weekly Decline Amid Middle East Conflict Concerns

Oil Prices Slightly Up as Middle East Conflict Concerns Ease

Oil prices saw a slight increase on Friday, but are on track to fall for the third consecutive week. This comes as worries about supply disruptions from the Israel-Hamas conflict have diminished, allowing concerns about demand to resurface.

Longest Weekly Losing Streak in Months

Both Brent and WTI crude futures are down this week, marking the longest weekly losing streak for both contracts since mid-April to early May. Brent futures have dropped by 5.7% while WTI has declined by 5.9% since last week.

Confidence in Middle East Supplies Wanes

ANZ Research noted that the threat of supply disruptions from the Middle East is decreasing, as the conflict remains contained within Gaza, despite initial concerns of escalation.

Shift in Focus from Supply to Demand

The easing of supply disruption fears coincides with rising concerns about demand, particularly from China, the world’s largest oil importer.

Chinese Economic Data Raises Concerns

Weaker economic data from China this week has heightened worries about faltering demand. Additionally, Chinese refiners, the largest buyers of oil from Saudi Arabia, have requested less supply from the world’s largest exporter for December.

Price Forecast Amidst Market Volatility

Despite the recent sell-off, analysts at Citi expect prices to recover, with support anticipated from easing refinery maintenance and a shift in the risk-reward for investors. They also highlighted potential upside risks and the possibility of intervention from OPEC+ to defend prices.

“We expect prices to consolidate, and we maintain our near-term price forecasts with support expected to come from refinery maintenance easing and a shift in the risk-reward for investors following the recent sell-off,” Citi said.

“Indeed upside risks abound from current levels, the potential for (the Organization of the Petroleum Exporting Countries and allies) to look to act to defend prices, while supply risks in the Middle East remain elevated.”