Oil Prices Tumble to Near Two-Week Low

HOUSTON (Reuters) – Oil prices tumbled more than 4% to a near two-week low on Tuesday due to a weaker demand outlook and after a media report indicated that Israel would not target Iranian nuclear and oil sites, easing fears of a supply disruption.

Brent crude futures settled down $3.21, or 4.14%, at $74.25 a barrel, while West Texas Intermediate (WTI) futures finished down $3.25, or 4.4%, at $70.58 a barrel.

Both benchmarks had earlier fallen by $4, reaching their lowest levels since the beginning of October, after settling about 2% lower on Monday.

"We're seeing an unwinding of the war premium we built up last week," said Phil Flynn, senior analyst at Price Futures Group. He noted that this situation is not primarily about supply, but rather the perceived risk to supply and demand.

Brent and WTI have dropped about $5 so far this week, nearly reversing gains made after concerns arose that Israel could retaliate against Iran's oil facilities following Tehran's missile attack on October 1.

Israeli Prime Minister Benjamin Netanyahu informed the United States that Israel was prepared to strike Iranian military targets but would refrain from targeting nuclear or oil facilities, according to a report by the Washington Post late on Monday.

This week, both the Organization of the Petroleum Exporting Countries (OPEC) and the International Energy Agency (IEA) lowered their forecasts for global oil demand growth in 2024, with China being the main contributor to these downgrades.

OPEC has projected a more robust expansion of global demand than the IEA, but John Evans at oil broker PVM remarked that OPEC's recent adjustments suggest an admission of overly optimistic projections.

In response to these market dynamics, OPEC and its allies, collectively known as OPEC+, may revise their production strategies for the end of this year, according to Andrew Lipow, president of Lipow Oil Associates. Lipow commented, "I think OPEC+ is going to defer raising production later this year."

He added that the current crude prices are below the levels necessary for many OPEC+ countries to fulfill their national budgets.