Oil prices rebound as Israel-Hamas war lingers
Brent futures rose by 0.26 per cent to $90.06 per barrel, recovering from the previous day’s loss of $89.83pb. Worries over possible supply disruptions in the Middle East owing to the Israel-Hamas war resurfaced, increasing bullish sentiments, said Chief Executive Officer (CEO) of Financial Derivatives Company (FDC) Limited, Bismarck Rewane.
“We expect oil prices to be influenced by the release of US crude inventories data and persistent supply concerns”, it said.
On Year-to-date (YtD), the price of aluminium fell by five per cent to $2,181/tonne in October 2023 from $2,300/tonne in December 2022. This decline is due to the global economic downturn and the continuous strengthening of the US dollar, which makes commodities priced in dollars, like aluminium, more expensive for foreign buyers. Looking ahead, we expect prices to be bullish in 2024 owing to higher demand from China (top consumer) and supply shortages. The EIU estimates a supply deficit of 400,000 metric tonnes in 2024.
CNBC the previous day reported that oil prices fell for the third straight session, after a flurry of slow economic data from Germany, the euro zone and Britain that weighed on the outlook for energy demand. Brent crude futures were down $1.76, or two per cent, at $88.07 a barrel. U.S. West Texas Intermediate crude futures were down $1.91, or 2.2 per cent, at $83.58 a barrel.
Euro zone business activity data took a surprise downward turn this month, suggesting the bloc may slip into recession.
German readings suggested a recession in that country is underway. Britain’s businesses reported another monthly decline in activity, highlighting recession risks ahead of the Bank of England’s interest rate decision next week.
“There is definitely a dialogue about the global economy being worse this week than it was last week,” said Mizuho analyst Robert Yawger. “It does not help that a lot of the top bankers and financial experts are in Saudi Arabia today talking about how bad the economy is,” he added, referring to the Future Investment Initiative event dubbed “Davos in the Desert”.
In contrast to Europe, U.S. data showed business output ticked higher in October as manufacturing pulled out of a five-month contraction. The relative strength of the U.S. economy helped lift the dollar, making dollar-denominated oil more expensive for holders of other currencies.
The International Energy Agency said it expected fossil fuel demand to peak by 2030 based on governments’ current policies.
On Monday, both oil benchmarks fell more than two per cent as diplomatic efforts in the Middle East, the world’s biggest oil-supplying region, intensified to contain the conflict between Israel and Hamas.
Julius Baer analyst Norbert Ruecker said “the risk premium inherent to oil prices should disappear within weeks … we see prices heading lower into next year.”
In the U.S., a weekly rise in crude stockpiles was expected in a preliminary Reuters poll.U.S. storage reports are due from the American Petroleum Institute industry group and from the U.S. Energy Information Administration.
