(Bloomberg) — Oil steadied after a two-day decline on the prospect for a further easing of hostilities in the Middle East, with the market shifting its attention to global supply balances and OPEC+’s production outlook.
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Brent traded above $71 a barrel after tumbling more than 6% over the previous two sessions, while West Texas Intermediate was near $67. Israel appears to be making moves to end the war with Hezbollah by year-end, after a retaliatory strike on Iran avoided oil and nuclear facilities.
The unwinding of a Middle East war premium has put weak fundamentals back into focus, including sluggish Chinese demand and plentiful global supply. All eyes are on OPEC+’s plans to gradually revive production from December, with traders split on whether the alliance will press ahead.
“Focus remains very much on the removal of the war premium and whether or not OPEC+ will go ahead with the planned increase in production,” said Robert Rennie, head of commodity and carbon strategy at Westpac Banking Corp. Brent is expected to test the high $60s in “a matter of time,” he added.
Commodity and financial markets are gearing up for two crucial events next week — the US election and a meeting of China’s top legislative body, with investors watching for any additional stimulus efforts to revive the economy. The Asian nation is the world’s biggest crude importer.
US crude stockpiles, meanwhile, shrank by 600,000 barrels last week, the industry-funded American Petroleum Institute reported, according to a document seen by Bloomberg. Gasoline and distillate inventories also fell.
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