Oil snapped a five-day winning streak on Tuesday as the recent rally stemming from the Middle East conflict took a pause, and China signaled no additional big stimulus.
West Texas Intermediate (CL=F) sank as much as 5% to trade below $74 per barrel. Brent (BZ=F), the international benchmark price, also slipped more than 4% to hover around $77 per barrel after touching its highest levels since August during the prior session.
The reversal comes after crude futures surged about 12% over the past five sessions on speculation that a retaliatory move from Tel Aviv against Tehran in the ongoing Middle East conflict could involve targeting Iran’s oil infrastructure.
More talks appear to be underway as Israel’s defense minister will travel to Washington to meet with US officials over the Middle East tensions on Wednesday, according to the Pentagon.
Without any additional escalation, the recent sharp gains could be temporary, according to industry watchers.
“We’ve seen spikes before…and they’ve come down pretty swiftly because tensions have eased and investors got a little less emotional and a little less worried. So I think that could easily happen again,” Invesco chief global market strategist Kristina Hooper told Yahoo Finance on Tuesday morning.
Oil also came under pressure after a Chinese economic planner told reporters Beijing is “fully confident” the country will meet its 2024 targets but made no mention of any large or new measures, signaling stalled demand from the world’s largest oil importer.
Traders point to technicals putting further pressure to the downside on prices.
“Note, futures briefly touched overbought status last night and ‘key reversal’ on the charts calls for a major downside correction,” Dennis Kissler, BOK Financial’s senior vice president of trading, wrote on Tuesday.
Separately, on Monday Chevron (CVX) announced it has evacuated all personnel from its Blind Faith platform in the Gulf of Mexico and shut-in the facility as a precaution in preparation for Hurricane Milton.
The Category 5 hurricane forecast to hit western Florida Wednesday night into Thursday morning, is not expected to impact crude production or refined products since there are no refineries in the Sunshine state.
However, analysts believe the distribution of gasoline and diesel throughout the state will likely be disrupted.
The average price for unleaded gas in the US was sitting at $3.18 per gallon on Tuesday, according to the latest AAA data, up one penny from Monday.
“They [gasoline prices] are rising, but not because of the storm. They are going up on the back of the tensions in the Middle East,” Andy Lipow, president of Lipow Oil Associates said in a note on Tuesday.
“If Israel does not attack oil facilities, gasoline prices will continue their downward trend toward $3.00 per gallon over the next month or so,” he added.
Ines Ferre is a senior business reporter for Yahoo Finance. Follow her on Twitter at @ines_ferre.
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