Investing.com — Oil prices fell sharply on Tuesday, extending recent losses amid growing concerns about a slowdown in demand, while a report suggesting Israel will not attack Iranian oil facilities was also decisive.
At 08:10 ET (12:10 GMT), the stock was down 3.9% at $74.44 per barrel, while down 4.2% to $70.75 per barrel.
Crude oil prices fell more than 2% on Monday and are down about $5 a barrel so far this week.
Fears about demand are growing due to OPEC cuts, China worries
Fears of declining oil demand put great pressure on prices, especially after somewhat disappointing signals from top importer China.
China’s Ministry of Finance this weekend outlined a raft of fiscal measures to support the economy. But traders were disappointed by a lack of clarity on the timing and extent of the measures, as well as a lack of clear measures aimed at supporting private consumption.
Data on Monday also showed China’s oil imports fell for the fifth straight month, indicating weak economic conditions wiped out China’s appetite for crude.
Fears of weakening demand were exacerbated by OPEC cutting its global oil demand forecasts for 2024 and 2025 for the third month in a row.
The cartel expects oil demand to grow by 1.93 million barrels per day in 2024, down from previous forecasts of growth of 2.03 million barrels per day. The cartel cited China as a key driver for the credit downgrade.
Will Israel spare Iran’s oil facilities?
Oil prices were also hit by a reduction in the risk premium after a report on Monday said Israel will not attack Iran’s oil and nuclear facilities.
Such a potential strike was expected to mark a major escalation of the conflict, and traders had seen oil prices rise on expectations of the attack.
Fears of all-out war in the Middle East have sent oil prices soaring in recent weeks, especially after Iran launched a missile attack on Israel earlier in October. The focus is now squarely on Israeli retaliation.
Citi drops oil price bull case
Despite talk of a moderately cautious response from Israel, Citigroup has withdrawn its bull case for oil prices after assessing historical risk events, given the potential for supply disruption in the Middle East.
The US bank maintains its baseline forecast of $74/barrel in the fourth quarter of this year and $65/barrel in the first quarter of 2025, with an indicative probability of 60%, due to weak underlying fundamentals in the oil market.
But it has raised its bull case scenario for oil prices for Q4-24 and Q1-25 from $80/bbl to $120/bbl, raising the indicative probability from 10% to 20% given the increased potential of the market to be afraid of. or realize supply losses in the coming months.
A recent analogy to the potential escalation in the Middle East from here is the conflict between Russia and Ukraine on February 22, with Brent crude rising to an average of $116 per barrel in the second quarter of 2022, the bank said.
“Our new bull case scenario is based on supply fears and disruptions similar in magnitude and duration to those in 2022,” Citi analysts said in an Oct. 14 note.
(Ambar Warrick contributed to this article.)
