Tensions in the Middle East have risen. Oil futures recovered more than $1 a barrel from seven-week lows on Wednesday after the killing of Hamas leader Ismail Haniyeh in Iran. Still, prices remain under pressure because of concerns about weak Chinese demand.
Brent crude futures rose $1.39, or 1.8%, to $80.02 a barrel by 0625 GMT before expiration on Wednesday, while the more active October contract gained $1.34 to $79.41.
WTI Crude futures rose $1.38, or 1.9%, to $76.11 a barrel. Brent and WTI fell about 1.4% on Tuesday to settle at seven-week lows.
Tensions in the Middle East have been rising after Hamas said on Wednesday that its leader Ismail Haniyeh was assassinated in Iran in the early hours of the morning.
This comes a day after the Israeli government claimed to have killed Hezbollah’s most senior commander in an airstrike in Beirut on Tuesday in retaliation for a cross-border rocket attack on Israel on Saturday.
The retaliation showed that Israel is not recognizing diplomatic efforts by US and UN officials to prevent a major escalation that could further inflame the Middle East.
Separately, the US has also launched an attack on Iraq in the region’s latest conflict. Putting it all together certainly increases the likelihood of an escalation in the Middle East.
It is also worth noting that speculative long positions in crude oil have significantly decreased after three weeks of declines. Therefore, conditions are ripe for a recovery.
Still, Brent and WTI are on track for their biggest monthly losses since October 2023 in July, amid China’s demand outlook and expectations that OPEC+ will stick to existing agreements to reduce output and roll back some cuts from October.
Top ministers from the Organization of the Petroleum Exporting Countries and allies led by Russia will hold an online joint ministerial monitoring committee (JMMC) meeting at 10:00 GMT on Thursday. OPEC+ is likely to stick to its production policy at its August 1 meeting.
Slowing fuel demand in China, the world’s largest crude importer and the biggest contributor to global demand growth is also weighing on oil markets.
China’s output contracted for a third month in July, an official factory survey showed on Wednesday, keeping alive expectations that Beijing will need to unleash more stimulus as a prolonged property crisis and job insecurity slow growth.
Meanwhile, the China story is well priced and has been one of the factors that have been dragging the market down in recent weeks.
U.S. crude oil inventories fell by 4.495 million barrels last week, with gasoline and distillate inventories also falling, according to figures from the American Petroleum Institute (API) on Tuesday.
Data from the Energy Information Administration (EIA) is due on Wednesday at 1430 GMT.
Analysts estimated that crude oil inventories fell by an average of 1.1 million barrels in the week to July 26.
