After a period of decline, global oil prices held steady following signs of increased stability in the Middle East region due to recent developments in the Israel-Hamas conflict. The widely monitored benchmark, Brent crude, saw minimal fluctuations, hovering around $88 per barrel on Tuesday. This came after a recent dip from the approximately $94 range observed late last week.
The White House reported that both the United States and Saudi Arabia have committed to pursuing diplomatic initiatives aimed at upholding stability throughout the Middle East. This announcement has alleviated concerns within the industry about potential major disruptions in the oil market.
Furthermore, the United States responded to market pressures by offering supplies into Europe at the lowest rates seen in months. This drop was attributed to a combination of reduced refinery profits and elevated freight costs. This development exerted notable pressure on key market indicators at the forefront of the futures curve.
According to data released by the industry-backed American Petroleum Institute, nationwide crude inventories experienced a decline of 2.67 million barrels in the previous week. However, stockpiles at the Cushing storage hub in Oklahoma showed a marginal increase. Official figures are slated for release later in the day.
In the early stages of the conflict in the Middle East, crude oil prices experienced a surge due to apprehensions regarding potential escalations that could imperil exports from Iran and disrupt vital shipping routes. However, these fears have subsided in recent sessions, coinciding with a mounting chorus within Israel advocating for a reevaluation of the potential scope of a ground incursion into Gaza.
Vishnu Varathan, the Asia head of economics and strategy at Mizuho Bank Ltd, suggested, “It might reflect the hold back on a ground invasion in Gaza.” He emphasized that a rapid escalation of risks would be evident if nations such as Iran or Lebanon were drawn into the conflict.
While recent support for oil prices has been attributed to the OPEC+ agreement, involving key producers like Saudi Arabia and Russia, the former has taken additional steps by unilaterally reducing exports for April to bolster oil prices. The relaxation of tensions in the Middle East represents a positive sign of stability. Nonetheless, the actual supply and demand dynamics in the tangible barrel market persist as a source of both pressure and caution within the industry.
Source: Bloomberg
