Oil prices were little changed on Tuesday after falling in the previous session as a U.S. plan to buy oil for the Strategic Petroleum Reserve (SPR) provided some support though wider concerns about weaker future demand growth exerted pressure.
Brent crude futures climbed 4 cents to US$71.46 a barrel by 0705 GMT, while U.S. West Texas Intermediate crude was down 1 cent at US$67.37 a barrel.
Both contracts tumbled 6% on Monday to their lowest since 1 October after Israel’s retaliatory strike on Iran at the weekend bypassed Tehran’s oil infrastructure.
With signs that neither country seemed likely to escalate the conflict after the attack, investor concerns about flagging global oil demand growth for this year and next rose to the fore.
“While outlook for the Middle East situation remains alarming, the market is expecting a temporary lull in retaliatory strikes between Israel and Iran,” said Hiroyuki Kikukawa, president of NS Trading, a unit of Nissan Securities.
“The U.S. plan to refill the SPR provided some support to the market,” he said, but predicted a downward trend ahead as peak winter kerosene demand season in the Northern Hemisphere was still some way off while demand in China remained sluggish.
The U.S. on Monday said it was seeking up to 3 million barrels of oil for the SPR for delivery through May next year, a purchase that would leave the government with little money to buy more until lawmakers approve more funds.
On Saturday, scores of Israeli jets completed three waves of strikes against missile factories and other sites near Tehran and in western Iran, the latest exchange between the Middle Eastern rivals.
The attacks were more tailored toward military targets, easing fears that Israel might attack Iran’s nuclear facilities or oil infrastructure.
“The targeted response from Israel does leave the door open for de-escalation, which would allow fundamentals once again to be the dominant driver for the market,” said ING Economics analysts in a report, adding that fundamentals are expected to be bearish through 2025.
Tensions in the Middle East remain high, however, as Iranian Foreign Ministry spokesperson Esmaeil Baghaei said on Monday that Iran will “use all available tools” to respond to Israel’s weekend attack.
The U.S. warned Iran at the United Nations Security Council of “severe consequences” if it undertakes any further aggressive acts against Israel or U.S. personnel in the Middle East.
In the U.S., crude oil and gasoline stockpiles likely rose last week, while distillate inventories were seen down, a preliminary Reuters poll showed on Monday.
The American Petroleum Institute industry group is scheduled to release a weekly report on Tuesday and the Energy Information Administration, the statistical arm of the U.S. Department of Energy, will issue one on Wednesday.