Oil Steadies After Two-Day Drop as Traders Track Mideast Tension
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(Bloomberg) -- Oil steadied after a two-day fall, with traders keeping their focus on geopolitical developments in the Middle East and the supply outlook.
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Global benchmark Brent held above $74 a barrel after losing more than 2% over the prior two sessions, while West Texas Intermediate was near $70. Negotiators between Israel and Hamas will meet in coming days, as they make a renewed effort to end the conflict in Gaza. At the same time, traders remain on alert for Israel’s potential retaliatory strike on Iran.
Oil has been whipsawed this month by the tensions in the Middle East, as well as concerns that the market may face a glut next year, with output growth from non-OPEC+ producers and plans by the cartel to ease curbs. The International Energy Agency warned this week that global demand growth would continue to weaken due to China’s slowdown and uptake of electric vehicles.
“Short positioning, while not extreme, is rather stretched, so it’s vulnerable to a short squeeze,” said Zhong Liang Han, a Singapore-based investment strategist at Standard Chartered Plc, referring to traders possibly facing pressure to close out bets on declines.
The market has been concerned that a strike by Israel on Iran could cut the country’s crude exports, boosting energy costs and raising the risks of a wider regional conflict. The US has urged Israel to avoid that step.
Brent’s prompt spread — the difference between its two nearest contracts — remains in backwardation, with near-term prices above those further out. The widely watched metric was 38 cents a barrel on Friday, in line with the figure last week and slightly wider than a month ago.
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