Oil Declines Again As Traders Prove Impervious To Declining Stocks, Middle East

More details about China's stimulus package also fail to impress:? File Image/Pixabay

The one-two punch of reduced demand growth worries and easing geopolitical tensions continued to result in losses for oil on Wednesday, but far less so than in recent sessions.

Still, Brent settling down 3 cents at $74.22 per barrel and West Texas Intermediate settling down 19 cents at $70.39 represented both benchmarks closing at their lowest levels since October 2, for the second consecutive session.

Also, with Israel still planning to strike Iran directly in response to an earlier botched rocket attack, it’s almost certain that concern over the Middle East will dominate investors’ behaviour in the near future.

China continued to factor into the bearish sentiment governing oil trading, and even though local media reported that the Chinese government may raise an additional 6 trillion yuan ($850 billion) from special treasury bonds over three years to kickstart a limp economy, this failed to inspire confidence.

It’s unclear whether some good news on Wednesday – the American Petroleum Institute reporting that U.S. crude stockpiles fell 1.6 million barrels last week – would reverse oil’s losses if confirmed by official data on Thursday; but if the numbers hold true, then it will be the first decline in three weeks.

Crude inventories have slumped by 7 million barrels since the beginning of the year, according to API data.

In other stockpiles news, the U.S. Department of Energy reported that Strategic Petroleum Reserve inventories rose by 1 million barrels as of October 11 to 383.9 million barrels, an increase of more than 36 million from its multi-decade low last summer, but still 251 million down from when Joe Biden took office as president; this prompted OilPrice.com to note that, “At the current rate of replenishment, it will take more than five years to return to January 2020 levels.”

Also on Wednesday, Enverus Intelligence Research revealed that the U.S. shale patch recorded $12 billion worth of mergers in the quarter ended Sept. 30, the lowest total in six quarters.

Enverus principal analyst Andrew Dittmar pointed out that some of the biggest buyers have become sellers, including Occidental Petroleum, which sold $818 million worth of properties to Permian Resources and APA Corp.

Dittmar said, "Upstream M&A was bound to drop" after 2023's record $192 billion in deals largely in the Permian Basin of West Texas.