Business ala October 12, 2024 0 Comments

Oil Steadies as US Stockpiles Swell, Traders Weigh China Policy

(Bloomberg) — Oil held steady after a day of choppy trading as US crude inventories swelled and traders monitored China’s plans for fiscal policy.

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West Texas Intermediate edged lower to close at $73.24 a barrel after earlier falling as much as 2.8%. Brent settled below $77 a barrel. Both benchmarks plunged 4.6% on Tuesday amid a broader market selloff after China’s top economic planner ended a briefing without announcing major fresh stimulus.

Oil prices moved off their lows of the day after official data from the US government showed the country’s crude stockpiles increased by 5.81 million barrels last week — a smaller buildup than the 11 million-barrel gain an industry group projected on Tuesday.

Prices also were supported by signs that tensions in the Middle East remain elevated. The latest reports indicated that Iran is prepared to launch thousands of missiles at Israel and target economic sites if it’s attacked.

Still, demand from China, the world’s top crude-importing nation, remains a major source of concern for oil investors, with market participants increasingly expecting a supply overhang next year. China announced that its finance minister will introduce moves to strengthen fiscal policy on Saturday with the aim of shoring up growth.

Crude’s geopolitical risk premium roared back when Iran launched missiles at Israel last week, and the market has since been awaiting a possible retaliatory strike by Israel on Iran’s oil facilities.

President Joe Biden has discouraged Israel from targeting Tehran’s oil fields, and Iran has continued exporting crude from its main Kharg Island terminal. Markets remain on edge, though, with volatility elevated and options in a bias toward calls, which profit when prices rise.

“Given the current geopolitical environment, no one really wants to add to short crude positions in the low $70-a-barrel area,” said Dennis Kissler, senior vice president for trading at BOK Financial Securities.

Morgan Stanley raised its Brent price forecast by $5 to $80 a barrel for the fourth quarter of this year on heightened geopolitical risk. Others have also struck a more bullish tone in recent days, with hedge fund manager Pierre Andurand saying crude could surge $10-$15 in the event of an attack, while Carlyle Group’s Jeff Currie said oil supply risks are the biggest in decades.

“My sense of positioning is that the tourists are long, the options specialists are long options and the normal traders that offset that flow are nowhere to be found as they remain on sidelines,” said Scott Shelton, an energy specialist at TP ICAP Group Plc.

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–With assistance from John Deane, Yongchang Chin and Alex Longley.