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Oil sinks 4% as potential Iran disruption fears subside

A natural gas flare in North Dakota, US. Oil prices have fallen about $4 this week, nearly wiping out cumulative gains made in the seven sessions up to last Friday Reuters/Andrew Cullen
A natural gas flare in North Dakota, US. Oil prices have fallen about $4 this week, nearly wiping out cumulative gains made in the seven sessions up to last Friday

Oil prices slid more than 4 percent on Tuesday after a media report said Israel was willing not to strike Iranian oil targets.

The news eased fears of supply disruption, and came after Opec lowered its outlook for global oil demand growth in 2024 and 2025.

Brent crude futures fell $3.28, or 4.2 percent, to $74.18 a barrel at 11:18 GMT. West Texas Intermediate futures lost $3.33, or 4.5 percent, hitting $70.50 a barrel.

Both benchmarks are down about $5 so far this week, nearly wiping out cumulative gains made after investors became concerned Israel could strike Iran’s oil facilities in retaliation for the latter’s October 1 missile attack.

The Israeli prime minister, Benjamin Netanyahu, has told the US that Israel is willing to strike Iranian military targets and not nuclear or oil ones, the Washington Post reported on Monday.

“Weakening demand has led to traders withdrawing the ‘war premium’ from prices,” said Priyanka Sachdeva, senior market analyst at Phillip Nova.

“However, geopolitics still continues to support oil at this level. Without geopolitics in the equation, oil would have tumbled even more, maybe even below $70 per barrel mark, amid the current weakening demand narrative.”

On Monday Opec cut its forecast for global oil demand growth in 2024 and also lowered its projection for next year.

“This is the third straight monthly downgrade, suggesting its previously optimistic forecasts have further to retreat,” analysts at ANZ Research said in a note on Tuesday.

Iraq “is still not making any progress in the extra cuts it promised to compensate for over-production,” ANZ said.

Also weighing on prices was a decline in crude shipments to the world’s largest oil importer, China, for the first nine months of the year, with data showing imports fell nearly 3 percent from last year.

China accounted for the bulk of the 2024 downgrade by Opec, as it trimmed its growth forecast for the country to 580,000 barrels per day (bpd) from 650,000 bpd.

Deflationary pressures in China worsened in September, according to official data released on Saturday. A press conference the same day left investors guessing about the overall size of a stimulus package to revive the fortunes of the world’s second-largest economy.