Investing.com-- Oil prices fell in Asian trade on Tuesday as a recent rebound ran out of steam, with concerns over slowing demand in major oil consumer China remaining squarely in play.
Focus also remained on any potential escalation in the Middle East conflict, as Israel kept up its offensives against Hamas and Hezbollah, and was also seen preparing a strike against Iran.
But geopolitical tensions appeared to be providing little support to oil prices, as the prospect of slowing demand and higher for longer interest rates weighed. These two factors saw oil log an over 7% slide last week.
Brent oil futures expiring in December fell 0.5% to $73.90 a barrel, while West Texas Intermediate crude futures fell 0.5% to $69.67 a barrel by 21:03 ET (01:03 GMT).
IEA warns China will continue to weigh on oil demand
International Energy Agency head Fatih Birol warned on Monday that weakness in top importer China will continue to weigh on global oil demand in the coming years.
Birol’s comments- made in an interview with Bloomberg- came after the IEA last month cut its demand growth forecast on concerns over China. The Organization of Petroleum Exporting Countries had also trimmed its global oil demand forecast last week.
China is the world’s biggest oil importer, and has been grappling with a prolonged downturn in economic growth, which is expected to quash the country’s appetite for crude.
Increased electric vehicle adoption in the country is also expected to dampen fuel demand.
China rate cut, M.East tensions provide fleeting support
Oil markets took limited positive cues from an interest rate cut in China on Monday, given that the move was largely telegraphed by the government. A swathe of recent stimulus efforts from the country also provided limited optimism, given that Beijing did not provide details on the timing and scale of the planned measures.
Concerns over a bigger Middle East conflict also gave little support to crude, even as the explosion of a drone near Israeli Prime Minister Benjamin Netanyahu’s house raised the prospect of an escalation in the conflict.
Focus is largely on Israel’s retaliation against Iran over an early-October attack, although reports last week said Israel will not target the country’s oil and nuclear infrastructure.
Fears of a worsening Middle East conflict have seen traders attach some risk premium to crude prices, on the prospect of supply disruptions in the region.