LONDON: Oil prices declined on Tuesday with concerns over potential oil supply disruption easing as the market still awaits an Israeli response to the Iranian rocket attacks last week which triggered the crude price rally.
Brent crude futures fell $1.11, or 1.37 percent, to $79.82 per barrel at around 11:05 a.m. Saudi time. US West Texas Intermediate futures fell $1.12, or 1.45 percent, to $76.82 a barrel.
Panmure Liberum analyst Ashley Kelty said prices are set to remain volatile but profit taking could pressure the market in the absence of a material shift in activity in the Middle East.
Both contracts rose more than 3 percent on Monday to their highest levels since late August, adding to last week’s rally of 8 percent, the biggest weekly gain in over a year, on concerns that escalating hostilities could disrupt oil supplies from the Middle East.
The oil price rally began after Iran launched a missile barrage on Israel on Oct. 1. Israel has sworn to retaliate and is weighing its options, with Iran’s oil facilities considered a possible target.
“Oil can keep ascending only for so long purely based on perceptions and not actual supply disruption ... although it would be irresponsible to claim that the dust has settled on Iran’s direct and ominous involvement
in the conflict, but for now the threats of Israeli assaults on Iranian oil infrastructure have not materialized yet,” said Tamas Varga of oil brokerage PVM.
However, some analysts said an attack on Iranian oil infrastructure is unlikely and warned oil prices could face considerable downward pressure if Israel focuses on any other target.
“Oil prices are suffering from a risk-off environment, likely driven by some disappointment on the latest Chinese stimulus measure announcement,” said Giovanni Staunovo, analyst at UBS.
China said on Tuesday it was “fully confident” of achieving its full-year growth target but refrained from introducing stronger fiscal steps, disappointing investors who had banked on more support from policymakers to get the economy back on track.
Investors have been concerned about slow growth dampening fuel demand in China, he world’s largest crude importer.
In the US, Hurricane Milton intensified into a Category 5 storm on its way to Florida after forcing at least one oil and gas platform in the Gulf of Mexico to shut on Monday.
Traders will be also looking out for the latest US crude oil inventory data, with analysts expecting stocks to rise by 1.9 million barrels in the week ended Oct. 4, according to a preliminary Reuters poll.
The American Petroleum Institute is due to post its tally of US stockpiles at 11:30 p.m. Saudi time on Tuesday, followed by the official tally from the Energy Information Administration at 5:30 p.m. Saudi time on Wednesday.
