Oil Prices Hold Steady Amid Supply Concerns and Middle East Tensions

SINGAPORE (Reuters) – Oil prices were little changed on Tuesday as stronger supply prospects and tepid global demand growth outweighed worries that escalating tensions in the Middle East could impact output from the key exporting region.

Brent crude futures for December delivery edged up 7 cents, or 0.1%, to $71.77 a barrel as of 0335 GMT. U.S. West Texas Intermediate crude futures for November delivery gained 8 cents, or 0.12%, to $68.25.

On Monday, Brent futures ended September down 9%, marking its third consecutive month of declines and the largest monthly drop since November 2022. It slumped 17% in the third quarter, representing its biggest quarterly loss in a year. Meanwhile, WTI fell 7% last month and dropped 16% for the quarter.

“There have been a lot of reservations in place for oil prices, as market participants look towards upcoming supply additions from OPEC+ by the end of this year, alongside a still-soft demand outlook from China reflected in the country’s latest PMI numbers,” said Yeap Jun Rong, market strategist at IG.

“That said, sentiments have been less sensitive to the weaker data, finding room to stabilize on the hopes that a recent raft of stimulus may help to jumpstart the economy ahead,” Yeap added.

China’s manufacturing activity shrank sharply in September as new orders at home and abroad cooled, pulling down factory owners’ confidence to near record lows, according to a private-sector survey released on Monday.

Analysts say a slew of stimulus measures over the last week are likely to be enough to bring China’s 2024 growth back to about 5%, following below-forecast data in the past several months. However, these measures will hardly change the long-term outlook.

Alongside the demand concerns, OPEC+, which includes OPEC members and allies like Russia, is set to raise output by 180,000 barrels per day in December.

Meanwhile, tensions in the Middle East remain on the radar. However, supply fears seem relatively contained for now, with market participants still pricing out the risks of a wider regional conflict, according to IG’s Yeap.

Israel’s anticipated ground invasion of Lebanon seemed to be starting early on Tuesday as its military announced troops had begun “limited” raids against Hezbollah targets in the border area. This follows Israel’s killing of Hezbollah leader Hassan Nasrallah on Friday and represents an escalation in the conflict between Israel and Iran-backed militants, a situation that now threatens to involve the U.S. and Iran.

In the U.S., crude oil and fuel stockpiles were expected to have fallen by about 2.1 million barrels in the week ending Sept. 27, according to a preliminary Reuters poll conducted on Monday. The poll was conducted ahead of a report from the American Petroleum Institute, due at 4:30 p.m. EDT (2030 GMT) on Tuesday.