Oil set for third weekly decline as Middle East crisis concerns ebb

Oil prices were up slightly on Friday but are set to fall for a third week as concerns of supply disruptions from the Israel crisis have ebbed, allowing demand worries to reassert themselves.

Brent crude futures for January were up 40 cents, or 0.5 per cent, at $80.41 a barrel at 0729 GMT, while the US West Texas Intermediate (WTI) crude futures for December were at $76.04, up 30 cents, or 0.4 per cent.

Brent futures are down 5.7 per cent this week while WTI has declined 5.9 per cent since last week.

Oil’s losing streak

The three weeks of declines are the longest weekly losing streak for both contracts since a four-week drop from mid-April to early May.

“The threat of disruptions to supplies from the Middle East continues to fall,” ANZ Research said in a note on Friday.

“The conflict remains well contained within Gaza, despite concerns it would escalate as neighbouring Arab nations show their displeasure.”

The White House said on Thursday that Israel had agreed to pause military operations in parts of north Gaza for four hours a day, though there was no sign of a complete let-up.

The sense supply disruptions from the Israel crisis are easing is occurring as concerns around demand, especially from China, the world’s largest oil importer, are rising.

Weak Chinese economic data this week increased worries of faltering demand.

Additionally, refiners in China, the largest buyer of crude oil from the world’s largest exporter Saudi Arabia, asked for less supply from Saudi Arabia for December.

However, analysts at Citi said in a note on Thursday it expected the downward pressure to ease and prices to recover after falling to their lowest since July earlier this week.

“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.”