Oil prices stable amid demand concerns and Middle East tensions

Oil prices remained largely unchanged on Tuesday as stronger supply prospects and weak global demand growth balanced out concerns that increasing tensions in the Middle East could disrupt production at a key exporting region.

At 0335 GMT, Brent crude futures for December delivery rose 7 cents, or 0.1%, to $71.77 a barrel. Also showing an increase were U.S. West Texas Intermediate, or WTI, crude for November delivery at 8 cents and 0.12% at $68.25.

Brent futures fell 9% at the end of September for their third consecutive monthly loss, the largest since November. For a third quarter, Brent declined 17%, the biggest three-month drop in a year, while WTI shed 7% last month and 16% over the quarter.

Yeap Jun Rong, a market strategist at IG, told CNBC: “There are plenty of doubts about oil prices, as market participants anticipate that OPEC+ will add supplies going into year-end against still-weak demand outlook from China after that PMI record.” He also noted that market sentiment has been somewhat resilient to hopes that recent stimulus measures might start stirring the economy.

Manufacturing in China collapsed in September as new orders both at home and abroad cooled, with factory owners’ sentiment slumping to almost record lows, a private sector survey showed Monday.

Even so, analysts say stimulus measures introduced in the recent past may even help turn around China’s growth rate for 2024 to around 5%. However, these measures are unlikely to change much going forward. OPEC+ is also likely to add 180,000 barrels per day in December.

While the tensions in the Middle East may represent a concern, supply fears appear relatively contained, at least for now as market participants still downplay the risks of a broader regional conflict. Israel’s military has started “limited” raids against Hezbollah targets in Lebanon in a move to escalate its conflict with Iran-backed militants.

A preliminary Reuters weekly poll indicated that crude oil and fuel inventories in the U.S. probably decreased by about 2.1 million barrels in the week that ended on September 27. The poll was conducted prior to a report from the American Petroleum Institute, which was expected to be issued at 4:30 p.m. EDT (2030 GMT) on Tuesday.