WTI holds near $69.00 on growing supply fears from Middle East conflict

• The price of WTI could appreciate amid fears of increased supply following Israel’s recent attacks on Iran-backed militant groups.
• Escalating attacks in the Middle East increase the likelihood that Iran will become directly involved in the conflict.
• Oil prices may have been under downward pressure following mixed Chinese manufacturing PMI data.

The price of West Texas Intermediate (WTI) oil is holding around $69.20 a barrel during the Asian hours on Monday. However, crude oil prices could appreciate amid growing concerns about potential supply disruptions in the Middle East following Israel’s stepped-up attacks on Iran-backed militant groups, Hezbollah and the Houthis. These geopolitical tensions may lead to fears of instability in the region, potentially impacting oil supply and driving prices higher.

Reuters reports that ANZ Research noted that the recent escalation of attacks in the Middle East increases the likelihood that Iran, a significant producer and member of the Organization of the Petroleum Exporting Countries (OPEC), will become directly involved in the conflict.

Israel said it bombed Houthi targets in Yemen on Sunday, widening its standoff with Iran’s allies. This action follows the killing of Hezbollah leader Sayyed Hassan Nasrallah two days earlier, escalating the ongoing conflict in Lebanon.

Oil prices may have come under downward pressure following mixed manufacturing purchasing managers’ index (PMI) data from the world’s biggest crude importer, China. China’s Caixin Manufacturing Purchasing Managers’ Index (PMI) fell to 49.3 in September, indicating a contraction, from 50.4 in August. The National Bank of China PMI (PMI) improved to 49.8 in September, up from 49.1 the previous month and beating the market consensus of 49.5.

In addition, oil traders are closely monitoring China’s recent monetary measures aimed at stimulating economic activity and boosting energy demand. Last week, China announced it would inject more than CNY 1 trillion in capital into its biggest state-owned banks, facing multiple challenges. This substantial infusion of capital would mark the first of its kind since the 2008 global financial crisis.

However, crude oil prices may face challenges due to Saudi Arabia’s plans to increase production later this year, along with OPEC+’s decision to increase production by 180,000 barrels per day in December. A report by the Financial Times, citing unnamed sources familiar with the country’s plans, indicated that Saudi Arabia has committed to restarting production on December 1, even if it leads to a period of lower prices.