(Bloomberg) — Oil prices fell on a weak fuel demand outlook and the possibility that the conflict between Iran and Israel could de-escalate after its recent flare-up.
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West Texas Intermediate crude fell nearly 1% to settle below $71 a barrel, while Brent retreated to settle below $74 a barrel. WTI had gained 4.8% last week, its biggest weekly advance since February.
Following days of rocket fire between Israel and Iran-backed Hezbollah, Iranian President Masoud Pezeshkian said Monday that his country is willing to reduce tensions as long as it sees the same level of commitment from the other side. The opening is easing some concerns that the conflict could escalate, threatening oil output in a region that supplies about a third of the world’s barrels.
Crude oil has also fallen this quarter on concerns that demand from China and the United States will weaken at the same time as output from non-OPEC countries increases, creating an oversupplied market. The outlook for fuel demand is worsening, making hedge funds the most bearish on diesel on record. Technical factors are also creating headwinds after crude rose about 10% from its 2024 lows hit earlier this month.
“Sentiment among energy investors 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 largest oil importer, authorities announced plans for financial regulators to give a rare briefing on the economy as the country cut a short-term policy rate. That fueled speculation that officials are preparing more efforts to revive growth.
Further stimulus from China could boost crude demand, said Robert Yawger, head of energy futures at Mizuho Securities USA.
“It’s difficult for crude oil to rally without growing demand from China,” Yawger said.
Meanwhile, from Mississippi to the Florida Panhandle, the U.S. Gulf Coast is at risk of a hurricane hitting it by the end of the week as a band of turbulent weather builds up in the Atlantic. Ahead of the storm, Shell Plc has cut production at the Appomattox project and the Stones oil field in the Gulf, according to a company statement.
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–With assistance from Alex Longley.
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