Oil prices plunge on report of talks to end Lebanon war

Oil prices fell slightly on Tuesday, following a drop of more than 6% in the previous session. This decline came after reports that Israeli Prime Minister Benjamin Netanyahu plans to convene a meeting to seek a diplomatic solution to the conflict in Lebanon.

Oil Prices Decline Amid Ongoing Middle East Tensions and Diplomatic Talks

Brent crude futures dropped by 30 cents, or 0.4%, to settle at $71.12 a barrel, while U.S. West Texas Intermediate crude decreased by 17 cents, or 0.3%, to $67.21 a barrel. Earlier in the session, both benchmarks had risen by more than $1 a barrel. On Monday, both contracts reached their lowest levels since October 1, following Israel's retaliatory strike on Iran over the weekend, which avoided targeting Tehran's oil infrastructure.

Netanyahu is set to meet with Israeli ministers and the leaders of the military and intelligence community on Tuesday evening to discuss diplomatic efforts regarding the war in Lebanon, according to Axios reporter Barak Ravid, who cited two sources. Meanwhile, Iranian Foreign Ministry spokesperson Esmaeil Baghaei stated on Monday that Iran will "use all available tools" to respond to Israel's recent attack over the weekend.

Weak Demand from China Continues to Pressure Global Oil Market

At the same time, decreasing oil demand from China, the world’s largest crude importer, continues to weigh on global oil consumption and prices. BP CEO Murray Auchincloss told Reuters that demand is expected to return to normal growth rates once Chinese President Xi Jinping implements new economic stimulus measures. Meanwhile, the CEO of Saudi Aramco stated that the oil market is currently balanced, with demand projected to average 104.5 million barrels per day this year.

"Markets attempted a modest recovery but remain under pressure due to weak demand from China and concerns over rising supply," said Andrew Lipow, president of Lipow Oil Associates. According to market sources citing American Petroleum Institute data on Tuesday, U.S. crude oil inventories decreased by 573,000 barrels in the week ending October 25. Additionally, gasoline stocks fell by 282,000 barrels, while distillate inventories dropped by 1.46 million barrels.

Last Wednesday's EIA report showed that (1) US crude oil inventories as of October 18 were -3.6% below the seasonal 5-year average, (2) gasoline inventories were -2.9% below the seasonal 5-year average, and (3) distillate inventories were -9.0% below the 5-year seasonal average. US crude oil production in the week ending October 18 was unchanged w/w at a record 13.5 million bpd.

Baker Hughes reported last Friday that active US oil rigs in the week ending October 25 fell by -2 rigs to 480 rigs, just above the 2-1/2 year low of 477 rigs posted in the week ending July 19. The number of US oil rigs has fallen over the past year from the 4-year high of 627 rigs posted in December 2022.

When considering shares, indices, forex (foreign exchange) and commodities for trading and price predictions, remember that trading CFDs involves a significant degree of risk and could result in capital loss.

Past performance is not indicative of any future results. This information is provided for informative purposes only and should not be construed to be investment advice.Trading cryptocurrency CFDs and spread bets is restricted for all UK retail clients