Oil prices slid as much as $3 to a near two-week low during Asian trade on Tuesday on the back of a weaker demand outlook and after a media report said Israel is willing not to strike Iranian oil targets, which eased fears of a supply disruption.
Brent crude futures were down $2.81, or 3.6%, to $74.65 per barrel at 0640 GMT, having dropped earlier to $74.26, its lowest since Oct. 2, Reuters reported.
US West Texas Intermediate futures fell $2.72, or 3.7%, to $71.11 per barrel. The contract fell as low as $70.75, its weakest since Oct. 3.
Both benchmarks had settled about 2% lower on Monday. They are down almost $5 so far this week, nearly wiping out cumulative gains made in the seven sessions up to last Friday when investors were concerned about supply risks as Israel planned to retaliate against a missile attack from Iran.
Israeli Prime Minister Benjamin Netanyahu told the US that Israel is willing to strike Iranian military targets and not nuclear or oil ones, the Washington Post reported late on Monday.
"Weakening demand has led to traders withdrawing the 'war premium' from prices," said Priyanka Sachdeva, senior market analyst at Phillip Nova.
"However, geopolitics still continues to support oil at this level. Without geopolitics in the equation, oil would have tumbled even more, maybe even below $70 per barrel mark amid the current weakening demand narrative."
The Organization of the Petroleum Exporting Countries (OPEC) on Monday cut its forecast for global oil demand growth in 2024, with China accounting for the bulk of the downgrade. China's demand is now seen growing by 580,000 barrels per day (bpd) this year, down from 650,000 bpd.
OPEC also lowered its global oil demand growth projection for next year to 1.64 million bpd from 1.74 million bpd.
China's customs data showed that September oil imports fell from a year earlier, as plants curbed purchases because of weak domestic fuel demand and narrowing export margins.
Independent market analyst Tina Teng said that while the demand outlook remains weak due to record high US production and soft Chinese demand, "oil retreated from the Middle East-tension-led surge as the market reaction may have been overdone."
