Oil dips as demand concerns outweigh ME supply fears

FE Team | Published: August 07, 2024 00:58:47

LONDON, Aug 6 (Reuters): Oil prices dipped lower in volatile trade on Tuesday, as a weak demand outlook after a global sell-off in markets on Monday countered price support from fears of an escalation in the Middle East conflict, and a drop in Libyan production.
Brent crude futures were down 41 cents, or 0.54 per cent, to $75.89 a barrel at 1320 GMT, while US West Texas Intermediate crude futures were down 43 cents, or 0.59 per cent, to $72.51.
Both contracts had gained over $1 a barrel earlier in the session, as a broader rally in Asian equity markets overnight supported prices in early trading.
"Despite a rebound in the early session driven by concerns over supply disruptions and rising tensions in the Middle East, crude oil futures could continue their downtrend as market reactions to disappointing US job growth data and weak economic signals from China created a wave of negative sentiment," said Hani Abuagla, senior market analyst at XTB MENA.
On Monday, both benchmarks fell about 1 per cent as US recession worries hammered global stock markets.
At the same time, weak demand figures, particularly in China, have capped oil prices.
"Demand concerns as a result of weaker economic data from the three most important demand regions - the US, China and Europe - have become more pronounced since Friday," said Commerzbank analyst Carsten Fritsch.
"(The) long-awaited seasonal upturn in demand in Q3 seems to be disappointing. Use of on-road fuels like gasoline and diesel is coming below initial bullish expectations," Onyx Capital Group analyst Harry Tchilinguirian said.
However, oil prices are finding a floor as concern mounts that Iran, a major Middle Eastern producer, may retaliate against Israel and the US following the assassination of a Hamas leader in Tehran and an Israeli attack that killed a Hezbollah commander in Lebanon, potentially leading to a wider regional war.
On Monday, at least five US personnel were injured in an attack against a military base in Iraq, US officials told Reuters. It was unclear whether the attack was linked to the retaliation threats.
Lower production at Libya's 300,000 barrel-per-day Sharara oilfield also helped provide a floor to price losses.
Libya's National Oil Corp said on Tuesday it would start to gradually decrease production at the field due to protests.