Oil prices rose after falling on a potential Israel-Hezbollah ceasefire

By Colleen Howe and Trixie Yap

(Reuters) – Oil prices rose on Wednesday as developments in the Middle East took center stage against cautious demand expectations and ahead of a government meeting on China’s fiscal policy.

Brent crude futures were up 45 cents, or 0.6 percent, at $77.63 a barrel by 0703 GMT. U.S. West Texas Intermediate futures rose 33 cents to $73.90 a barrel.

Prices fell more than 4 percent in the previous session on a possible Hezbollah-Israel ceasefire, but markets remain wary of a potential Israeli attack on Iran’s oil infrastructure.

“The daily dilemma of ‘Middle East headlines’ swinging like a pendulum between ‘ceasefire talks’ and ‘further escalation of attacks’ is distracting investors from reality… Oil markets are flipped on sentiment of ‘buying the rumor’ and leaving out real fundamentals that should matter,” Phillip Nova, principal market analyst Priyanka Sachdeva, said in an email.

Tuesday’s sell-off followed a rally that began after Iran launched a missile barrage on Israel on Oct. 1, culminating in an 8 percent gain for the week on Friday, the biggest in more than a year.

Hezbollah officials appeared on Tuesday to abandon a Gaza ceasefire as a condition for a cease-fire in Lebanon. Hezbollah’s deputy leader, Naim Qassem, said he supported attempts to secure a truce in a televised speech, the first time an end to the war in Gaza was not mentioned as a precondition.

Also supporting prices, China’s Finance Ministry will detail fiscal stimulus plans at a highly anticipated press conference on Saturday, the government’s main information office said on Wednesday.

Markets awaited further news on fiscal support from Beijing to help China’s sagging economy, which in turn may boost oil demand. A news conference by the state planner on Tuesday disappointed investors after he offered no big stimulus to revive economic growth.

OANDA senior market analyst Kelvin Wong expects a sideways trading pattern for the near-term oil market, with WTI bound in a range of $73.15 to $78.30 a barrel, pending announcements on China’s new fiscal stimulus measures and developments in the Middle East.

On the demand front, data showed U.S. crude inventories rose by nearly 11 million barrels last week, much more than analysts polled by Reuters had expected, according to market sources citing data from the American Petroleum Institute on Tuesday. . However, fuel stocks have declined.

Weak demand continued to support the fundamental outlook. The US EIA on Tuesday downgraded its 2024 forecast for global oil demand to rise by 20,000 barrels per day (bpd) to 103.1 million bpd due to weaker industrial output and rising production in the US and China .

(Reporting by Colleen Howe; Editing by Kim Coghill and Jacqueline Wong)