Oil Falls for Second Day as Israel Talks Outweigh China Stimulus
Oil extended losses following its biggest drop in more than two years on Monday as signs of a potential de-escalation of Israel’s Lebanon offensive overshadowed the prospects of more stimulus in China.
Oil extended losses following its biggest drop in more than two years on Monday as signs of a potential de-escalation of Israel’s Lebanon offensive overshadowed the prospects of more stimulus in China.
West Texas Intermediate fell to around $67 a barrel on the news that Israeli Prime Minister Benjamin Netanyahu plans to hold a meeting about a diplomatic solution to the war in Lebanon. The US benchmark had climbed as much as 1.7% earlier on reports that China is weighing more than 10 trillion yuan in fiscal stimulus. Brent hovered around $71 a barrel.
Crude’s long-standing war premium has significantly unwound, hastened by signs of Israel’s openness to a short truce in Gaza. That’s putting weak fundamentals back into the spotlight, with the market heading into a crucial period that includes a tight US presidential election and OPEC plans to start unwinding voluntary production cuts from December.
“Traders have concluded that this chapter of the Middle East conflict has closed,” said Daniel Ghali, a commodity strategist at TD Securities. “Now, the focus is on OPEC’s upcoming decision and whether it will be enough to stem the bleed in oil markets.”
In another sign that war risk is fading, the premium of bullish oil call options over the opposite puts has narrowed sharply. A gauge of implied volatility for Brent also fell to the lowest in almost a month on Monday, and a swath of contracts expired worthless as prices cooled.
Also see: Oil Traders Split on Whether OPEC Will Hike Supply in December
Away from the conflict, the US Energy Department said Monday it would seek to add 3 million barrels of oil to the Strategic Petroleum Reserve. A slew of economic data from the US this week, including on growth and employment, may give clues on the Federal Reserve’s rate-cut path.
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This article was generated from an automated news agency feed without modifications to text.
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First Published:29 Oct 2024, 11:49 PM IST
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