By Arunima Kumar
LONDON (Reuters) -Oil prices fell on Tuesday as concerns about a possible oil supply disruption ease as the market still awaits an Israeli response to last week’s Iranian missile attacks that sparked the rally in the crude oil.
Brent crude futures fell $1.11, or 1.37%, to $79.82 a barrel by 0805 GMT. U.S. West Texas Intermediate futures fell $1.12, or 1.45%, to $76.82 a barrel.
Panmure Liberum analyst Ashley Kelty said prices will remain volatile, but profit-taking could put pressure on the market if there is no material shift in activity in the Middle East.
Both contracts rose more than 3% on Monday to their highest levels since late August, adding to last week’s 8% rally, the biggest weekly gain in more than a year, on concerns that escalating hostilities could cut oil supplies from the Central East could disrupt.
The oil price surge began after Iran launched a barrage of missiles at Israel on October 1. Israel has vowed revenge and is considering its options, with Iranian oil facilities seen as a possible target.
“Oil can only continue to rise for so long based solely on perceptions and not on actual supply disruptions…although it would be irresponsible to claim that the dust has settled on Iran’s direct and ominous involvement in the conflict, but for now the threats of Israeli attacks on Iran’s oil infrastructure have not yet materialized,” said Tamas Varga of oil brokerage PVM.
However, some analysts said an attack on Iran’s oil infrastructure is unlikely and warned that oil prices could face significant downward pressure if Israel were to focus on another target.
“Oil prices are suffering from a risky environment, likely driven by some disappointment over the latest Chinese stimulus announcement,” said Giovanni Staunovo, an analyst at UBS.
China said on Tuesday it was “confident” of achieving its full-year growth target but refrained from introducing stronger fiscal measures, disappointing investors who had counted on more support from policymakers to get the economy back on track to get.
Investors are concerned that sluggish growth will dampen fuel demand in China, the world’s largest importer of crude oil.
In the US, Hurricane Milton has intensified into a Category 5 storm on its way to Florida after forcing the closure of at least one oil and gas platform in the Gulf of Mexico on Monday.
Traders will also be on the lookout for the latest data on US crude inventories, with analysts expecting stocks to rise by 1.9 million barrels in the week ending October 4, according to a preliminary Reuters poll.
The American Petroleum Institute will release its count of US inventories at 2030 GMT on Tuesday, followed by the Energy Information Administration’s official count at 1430 GMT on Wednesday.
(Reporting by Arunima Kumar in London and Emily Chow in Singapore; Editing by Sonali Paul, Jamie Freed and David Evans)
