(Bloomberg) — Oil prices fell on a weak fuel demand forecast and the possibility that the Iran-Israel conflict could de-escalate after a recent flare-up.
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West Texas Intermediate fell nearly 1% to close below $71 a barrel, while Brent fell back to close below $74 a barrel. WTI rose 4.8% last week in its biggest weekly jump since February.
After days of rocket fire between Israel and Iran-backed Hezbollah, Iranian President Masoud Pezeshkian said Monday his country is ready to de-escalate tensions as long as it sees the same level of commitment on the other side. The rapprochement eases some concerns that the conflict will worsen, threatening oil production 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 U.S. will decline at the same time that non-OPEC production rises, creating a glut in the markets. The outlook for fuel demand is deteriorating, making hedge funds the most pessimistic on diesel ever. Technicals are also a headwind after crude rose about 10% from 2024 lows hit earlier this month.
“Investor sentiment in the energy sector has turned definitively pessimistic as OPEC+ now plans to add barrels to a surplus of oil on the 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 hold rare briefings on the economy as the country cut a short-term policy rate, fueling speculation officials are ramping up efforts to revive growth.
According to Robert Yawger, director of energy futures at Mizuho Securities USA, more stimulus from China could boost demand for crude oil.
“It is difficult for crude oil to scale without demand growth in China,” Yawger said.
Meanwhile, from Mississippi to the Florida Panhandle, the U.S. Gulf Coast is at risk of a hurricane by the end of the week as a patch of turbulent weather in the Atlantic Ocean becomes more organized. Shell Plc has curtailed production at its Appomattox project and Stones oil field in the Gulf ahead of the storm, the company said in a statement.
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–With assistance from Alex Longley.
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