Oil Market Drops 2% on Eased Middle East Tensions, Weak Demand

By Adedapo Adesanya

The crude oil market fell by 2 per cent on Thursday as fresh fears of a wider Middle East conflict eased at the same time that demand showed signs of weakening in the United States.

Brent crude futures depreciated by $2.20 or 2.44 per cent to trade at $87.93 a barrel, and the US West Texas Intermediate (WTI) crude futures finished lower by $2.18 or 2.55 per cent at $83.21 a barrel.

Oil prices have been boosted recently by fears of a spillover affecting global crude supplies from the conflict between Israel and the Palestinian militant group, Hamas.

The presence of other players like Iran and its allies in the region continues to be a hot issue.

The US and other countries are urging Israel to delay a full invasion of Gaza, which is reeling from almost three weeks of Israeli bombing triggered by a mass killing spree in southern Israel by Iranian-backed Hamas.

The foreign ministers of Bahrain, Egypt, Jordan, Kuwait, Morocco, Oman, Qatar, Saudi Arabia and the United Arab Emirates have condemned what they called the targeting of civilians and violations of international law.

Worries about the broader global economy also weighed on prices.

The US economy, however, grew at its fastest pace in nearly two years in the third quarter, data showed on Thursday, raising expectations that the Federal Reserve will keep interest rates high for longer.

The world’s largest economy grew by 4.9 per cent in the third quarter, as it defied warnings of a recession.

A rise in US crude inventories in the latest week indicated weaker demand following a climb of 1.4 million barrels to 421.1 million barrels, according to the Energy Information Administration (EIA).

The European Central Bank (ECB) left interest rates unchanged as expected on Thursday, snapping an unprecedented streak of 10 consecutive rate hikes, and maintained its guidance which implies a steady policy ahead.

Markets will be looking forward to the Organisation of the Petroleum Exporting Countries and its allies (OPEC+) plans for production levels with members next scheduled to meet in late November.

OPEC+, led by Saudi Arabia and Russia, cut production by 1.3 million per day earlier this year and in September extended the reduced production level through the end of the year.