Crude extends drop with Brent near $74 as concerns ease, demand outlook falls

While geopolitical tensions pose a risk to the energy infrastructure in the middle east, the IEA has warned of a glut in the oil market glut in early 2025, cutting the demand growth forecast, adding that spare capacity of OPEC+ group is near record levels.

Oil prices extended their fall on Tuesday as OPEC lowered its outlook for global oil demand growth in 2024 and 2025 and a media report cited sources saying Israel may not target Iranian nuclear or oil installations.

Brent crude futures were down to $74 per barrel, while U.S. West Texas Intermediate crude futures fell to near $70 per barrel at 3:30pm, extending Monday's fall. Brent crude prices had fallen on Monday after China over the weekend failed to inspire confidence among investors about specific new incentives to boost consumption.

With this fall, oil prices are down about $5 so far this week, almost wiping out the rise seen over concerns that Israel could strike Iran's oil facilities in retaliation to its recent missile attack.

While geopolitical tensions pose a risk to the energy infrastructure in the middle east, the International Energy Agency (IEA) has warned of a glut in the oil market glut in early 2025, cutting the demand growth forecast, adding that spare capacity of OPEC+ group is near record levels.

Both OPEC and IEA have cut their forecasts for global oil demand growth in 2024.

Meanwhile, Israeli Prime Minister Benjamin Netanyahu has said the Israel may not strike Iranian nuclear or oil facilities, the Washington Post report said, citing sources, partially reassuring the market sentiment.

"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," Reuters quoted Priyanka Sachdeva, senior market analyst at Phillip Nova.