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Oil Prices Regain Some Ground after 7% Loss Last Week

Oil pump jacks work at sunset near Midland, Texas, U.S., August 21, 2019. REUTERS/Jessica Lutz/File Photo
Oil pump jacks work at sunset near Midland, Texas, U.S., August 21, 2019. REUTERS/Jessica Lutz/File Photo
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Oil Prices Regain Some Ground after 7% Loss Last Week

Oil pump jacks work at sunset near Midland, Texas, U.S., August 21, 2019. REUTERS/Jessica Lutz/File Photo
Oil pump jacks work at sunset near Midland, Texas, U.S., August 21, 2019. REUTERS/Jessica Lutz/File Photo

Oil prices rose on Monday, recouping some of last week's more than 7% decline on worries about demand in China, the world's top oil importer, and easing concerns about potential supply disruptions in the Middle East.

Brent crude futures were up $1.16, or 1.6%, to $74.22 a barrel at 1036 GMT. US West Texas Intermediate crude futures were up $1.32, or 1.9%, to $70.54 a barrel.

Brent settled down more than 7% last week, while WTI lost around 8%. Those were the contracts' biggest weekly declines since Sept. 2, due to slowing economic growth in China and falling risk premiums in the Middle East, Reuters reported.

China on Monday cut benchmark lending rates as anticipated, part of a broader package of stimulus measures to revive the economy.

Data on Friday showed that China's economy grew at the slowest pace since early 2023 in the third quarter, fuelling growing concerns about oil demand.

Saudi Aramco's CEO told an energy conference in Singapore on Monday that he was still "fairly bullish" on China's oil demand in light of stepped up policy support aimed at boosting growth, and because of rising demand for jet fuel and liquid-to-chemicals.

"Geopolitical tensions in the Middle East and the positive oil demand comments from the CEO of Aramco are likely supporting oil prices," UBS analyst Giovanni Staunovo said.

The US Energy Information Administration said on Friday weekly oilfield production rose by 100,000 barrels per day (bpd) to a record 13.5 million bpd during the week ended Oct. 11.

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Oil Slumps More than 4% after Iran Downplays Israeli Strikes

Oil pump jacks work at sunset near Midland, Texas, US, August 21, 2019. REUTERS/Jessica Lutz/File Photo
Oil pump jacks work at sunset near Midland, Texas, US, August 21, 2019. REUTERS/Jessica Lutz/File Photo
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Oil Slumps More than 4% after Iran Downplays Israeli Strikes

Oil pump jacks work at sunset near Midland, Texas, US, August 21, 2019. REUTERS/Jessica Lutz/File Photo
Oil pump jacks work at sunset near Midland, Texas, US, August 21, 2019. REUTERS/Jessica Lutz/File Photo

Oil prices tumbled more than $3 a barrel on Monday after Israel's retaliatory strike on Iran over the weekend bypassed Tehran's oil and nuclear facilities and did not disrupt energy supplies, easing geopolitical tensions in the Middle East.
Both Brent and US West Texas Intermediate crude futures hit their lowest levels since Oct. 1 at the open. By 0750 GMT, Brent was at $72.92 a barrel, down $3.13, or 4.1%, while WTI slipped $3.15, or 4.4%, to $68.63 a barrel, Reuters said.
The benchmarks gained 4% last week in volatile trade as markets priced in uncertainty around the extent of Israel's response to the Iranian missile attack on Oct. 1 and the US election next month.
Scores of Israeli jets completed three waves of strikes before dawn on Saturday against missile factories and other sites near Tehran and in western Iran, in the latest exchange in the escalating conflict between the Middle Eastern rivals.
The geopolitical risk premium that had built in oil prices in anticipation of Israel's retaliatory attack came off, analysts said.
"The more limited nature of the strikes, including avoiding oil infrastructure, have raised hopes for a de-escalatory pathway, which has seen the risk premium come off a few dollars a barrel," Saul Kavonic, a Sydney-based energy analyst at MST Marquee, said.
"The market will be watching closely for confirmation Iran won't counter attack in the coming weeks, which could see the risk premium rise again."
Commonwealth Bank of Australia analyst Vivek Dhar expects market attention to turn to ceasefire talks between Israel and Iran-backed militant group Hamas that resumed over the weekend.
"Despite Israel’s choice of a low aggression response to Iran, we have doubts that Israel and Iran’s proxies (i.e. Hamas and Hezbollah) are on track for an enduring ceasefire," he said in a note.
Citi lowered its Brent price target in the next three months to $70 a barrel from $74, factoring in a lower risk premium in the near term, its analysts led by Max Layton said in a note.
Analyst Tim Evans at US-based Evans Energy said in a note: "We think this leaves the market at least somewhat undervalued, with some risk OPEC+ producers may push back the planned increase in output targets beyond December."
In October, the Organization of the Petroleum Exporting Countries and their allies, a group known as OPEC+, kept their oil output policy unchanged including a plan to start raising output from December. The group will meet on Dec. 1 ahead of a full meeting of OPEC+.