Oil prices have been stuck between fears of escalation and hopes of a ceasefire

Crude oil prices started trading little changed early today after a substantial rise in US inventories surprised traders, adding to the bearish mood driven by the Chinese government’s decision not to issue new economic stimulus measures every week.

Brent crude and West Texas Intermediate remain higher than a week ago, but off the highs they hit late in the week as traders braced for Israel’s response to Iran’s missile attack on military facilities. So far, that response has only come in the form of strikes on Lebanon, which in turn have led to media reports of a possible cease-fire.

Reuters reported on Tuesday that Hezbollah had signaled it could be open to a cease-fire with the Israelis and was not making it conditional on a cease-fire in Gaza. The prospect of this leading to an end to hostilities in Lebanon has put pressure on prices. API-estimated US crude inventories of nearly 11 million barrels in the week to October 4 didn’t exactly help oil prices either.

“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 missing real fundamentals that should matter,” Phillip Nova senior market analyst Priyanka Sachdeva told Reuters.

To this could be added the emphasis on increasing oil demand from China and the expectation that the government in Beijing is ready to do anything to increase this demand, when in fact it has no incentive to do so as the largest importer of crude oil in the world. . The Chinese government is indeed trying to shore up economic growth, but it is quite unlikely to overdo it with less than three months to the end of the year.

By Irina Slav for Oilprice.com

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