Oil Prices Rebound in Asian Trade Amid Supply Concerns and Weak China Data
Supply Concerns Offset Weak China Data
Oil prices in Asian trade experienced a rebound on Tuesday, following a drop of over 3% in the previous session. The rebound was driven by worries over supply due to conflict in the Middle East, which outweighed the impact of dismal data from China.
Rising Oil Prices in Asian Trade
In Asian trade, oil prices rebounded after a previous drop of more than 3%. December futures, set to expire on Tuesday, rose by 65 cents, or 0.74%, reaching $88.10 per barrel by 0637 GMT. The more heavily traded January Brent crude futures also climbed 63 cents, or 0.73%, to $86.98. Additionally, U.S. West Texas Intermediate crude increased by 67 cents, or 0.81%, to $82.98.
Oil Prices React to Middle East Conflict and China Data
Despite an escalation of Israel’s attacks on Gaza, oil prices tumbled on Monday as investors grew cautious ahead of the U.S. Federal Reserve meeting scheduled for Wednesday. The conflict in the Middle East, combined with the possibility of involvement from Iran, contributed to concerns over tighter supply. However, the situation remains uncertain, and market upside now depends on whether Israel expands its ground offensive.
Disruptions to Iranian oil flows continue to pose the most obvious risk to the market, according to ING analysts. They estimate that if the United States strictly enforces sanctions once again, lost supply could range between 500,000 barrels per day (bpd) and 1 million bpd. However, as of now, developments in the Middle East have not yet affected oil supply.
Weaker-Than-Expected China Data Adds to Concerns
In China, weaker-than-expected manufacturing and non-manufacturing activity data have raised fears of slowing fuel demand from the world’s second-largest oil consumer. The official purchasing managers’ index fell below the 50-point level separating contraction from expansion, adding to concerns about the overall health of the Chinese economy.
Additional Factors Influencing Oil Prices
Oil prices also gained some support due to concerns over prospects for crude exports from Venezuela, which is currently facing election uncertainty. The Supreme Court’s suspension of the results of the recent opposition presidential primary raises questions about whether the United States will continue to provide relief from sanctions. The U.S. had recently eased sanctions in exchange for the promise of fairer elections in 2024.
Market participants are closely monitoring the U.S. central bank meeting ending on Wednesday. While it is highly likely that interest rates will remain steady, there is still anticipation surrounding any potential announcements or statements made during the meeting.
In Conclusion
The rebound in oil prices in Asian trade was driven by concerns over supply due to the conflict in the Middle East, despite weak data from China. Market participants are closely watching the situation in the Middle East and developments in China, as well as keeping an eye on other factors that may influence oil prices.
