Oil edged higher after a steep drop spurred by signs that the Israel-Hamas war will remain contained while demand may be softening.
West Texas Intermediate rose toward $83, after losing nearly 4% on Monday to erase all of the gains that followed the Oct. 7 attack on Israel. Global benchmark Brent was near $88. The ground invasion of Gaza has yet to spark a wider regional conflict that could risk crude supplies, although Prime Minister Benjamin Netanyahu has ruled out a cease-fire.
Crude is wrapping up a turbulent month, with prices rocked by the war and mixed indicators on demand. Both WTI as well as Brent are on course to cap declines in October as the risk premium triggered by the conflict fades away with concerns of a global slowdown returning to the fore.
There are “expectations that the conflict may still be contained,” which may cap the war risk premium, said Yeap Jun Rong, a market strategist at IG Asia Pte.
A narrowing in WTI’s prompt spread — the difference between its two nearest contracts — suggests that near-term conditions are becoming less tight. The widely watched differential has dropped back to 63 cents a barrel in backwardation, down from about $2 a barrel at the end of September.
Among demand signals in recent days, a Bloomberg survey suggested Saudi Arabia would refrain from increasing its flagship oil price for Asian customers for the first time in six months as refinery margins weaken. Separately, OilChem reported that Chinese processors may cut runs on poor margins.
Elsewhere, oil consumption in Germany is set for a sharp slump this year, according to the Paris-based International Energy Agency. In the US, meanwhile, physical gasoline in the New York spot market has lost its premium over futures for the first time in about a month amid softer-than-usual demand.
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