Oil falls after Iran says it is ready to ease tensions in Israel

(Bloomberg) — Oil fell on a weak outlook for fuel demand and the potential for an easing of the conflict between Iran and Israel after its recent crisis.

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West Texas Intermediate fell nearly 1 percent to settle below $71 a barrel, while Brent retreated to settle below $74 a barrel. WTI gained 4.8% last week in its biggest weekly jump since February.

After days of Israel and Iran-backed Hezbollah trading missiles, Iranian President Masoud Pezeshkian said Monday that his country was ready to ease tensions as long as it saw the same level of commitment from the other side. The overture eases some concerns that the conflict will escalate, threatening oil production in a region that supplies about a third of the world’s barrels.

Crude oil also fell this quarter on fears that demand from China and the US will weaken as non-OPEC production rises, creating an oversupplied market. The outlook for fuel demand worsens, sending hedge funds into the worst declines for diesel on record. Technicals are also providing headwinds after crude rose about 10% from 2024 lows hit earlier this month.

“Energy investor sentiment has turned decidedly bearish as OPEC+ now plans to add barrels to a surplus oil market,” Bank of America Corp. analysts, including Francisco Blanch, wrote in a note.

In China, the world’s biggest oil importer, authorities announced plans for financial regulators to provide a rare insight into the economy as the country cuts a short-term policy rate. This has fueled speculation officials are preparing more efforts to revive growth.

Increased stimulus from China could improve crude oil demand, said Robert Yawger, director of energy futures at Mizuho Securities USA.

It is “difficult for crude oil to rise to size without increased Chinese demand,” Yawger said.

Meanwhile, from Mississippi to the Florida Panhandle, the US Gulf Coast is at hurricane risk by the end of the week as an area of ​​choppy weather in the Atlantic becomes more organized. Ahead of the storm, Shell Plc cut production at the Appomattox project and the Stones oil field in the Gulf, according to a company statement.

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–With help from Alex Longley.

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