Development of Oil Prices Under Pressure: Geopolitics and Declining Chinese Demand in Focus

Oil prices came under pressure on Tuesday after a leading U.S. diplomat made renewed efforts to achieve a ceasefire in the Middle East. At the same time, the continuing weak demand from China, the world's largest oil importer, is weighing on the markets. Brent crude futures for December fell by 26 cents to $74.03 per barrel. Simultaneously, the November contracts for U.S. West Texas Intermediate (WTI) recorded a slight decline of 2 cents to $70.54 per barrel, just on the last trading day of this front month. The more active WTI futures for December lost 23 cents and stood at $69.81 per barrel. On Monday, both Brent and WTI gained nearly 2%, making up for part of last week's decline of over 7%. The ongoing uncertainty about developments in the Middle East continues to cause market jitters, particularly due to Israel's expected response to Iran, which could lead to a disruption in oil supplies. Satoru Yoshida, a commodity analyst at Rakuten Securities, commented on the fluctuating crude oil prices and pointed to the interplay of escalations and de-escalations in the Middle East. If clearer signs of economic recovery in China emerge, supported by Beijing's stimulus measures and economic improvements in the U.S. following rate cuts, the markets could rise. However, ongoing uncertainties about the global economic outlook might limit these gains. Meanwhile, U.S. Secretary of State Antony Blinken traveled to the Middle East to renew talks to end the Gaza conflict and ease tensions in Lebanon. Meanwhile, China, as expected, cut its key interest rates as part of a package of stimulus measures to revive the economy. Recent figures show that China's economic growth in the third quarter was the slowest since the beginning of 2023, further fueling concerns about oil demand. Despite these developments, Saudi Aramco remains optimistic about Chinese oil demand, especially given the government measures to promote growth.