On Friday, oil prices were little changed after yesterday’s rise. However they are still poised to fall for a third week as the dangers of supply disruptions from the Israel-Hamas conflict have diminished, and concerns over falling demand have reasserted themselves.
Brent crude futures for January delivery were steady at $80.01 per barrel as of 0157 GMT, as US West Texas Intermediate (WTI) crude futures for December delivery fell 7 cents to $75.67.
This week Brent futures fell 5.7% while WTI dropped 5.9% since last week. The declines over the previous three weeks in a row marked the longest weekly losing streaks for the two contracts since early May of last year, when they suffered a four week losing streak.
In a note on Friday, ANZ research said, “The threat of disruptions to supplies from the Middle East continues to fall.”
The note added, “The conflict remains well contained within Gaza, despite concerns it would escalate as neighbouring Arab nations show their displeasure.”
On Thursday, the White House said that it had negotiated with Israel, which agreed to perform a four hour pause in combat operations in the norther part of Gaza every day to allow civilians to evacuate, although so far there is no signs of when the military operation in Gaza will be completed.
However as the conflict has dragged on, traders have begun to get the sense that the risks of supply disruptions due to the fighting are gradually diminishing. At the same time, concerns over demand, especially from the world’s largest importer, China, are growing.
This week saw weak economic data coming out of the world’s second largest economy, which increased fears that demand may be beginning to falter. On top of that, refiners in the nation, which is the largest buyer of crude oil from the world’s largest exporter, Saudi Arabia, have reduced the amount they are ordering for delivery in December.
In a note from Citi, released on Thursday however, analysts predicted we would see downward pressures ease after falling to their lowest level since July this week, which will allow prices to recover.
Citi said, “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.”
They added, “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.”
