Oil Continues To Decline On Conflicting Worries As UK Contributes To Concerns

But Bloomberg is bullish about U.S. activity: File Image/Pixabay

The perennial bogeys of demand and the Middle East were the chief drivers of crude trading on Thursday, said to "zig and zag" as slow economic growth in Europe and the expectation that Israel would resist calls for a ceasefire added to an already chilly bearish sentiment.

As of 1548 GMT, Brent dipped by 54 cents to $74.42 per barrel, while West Texas Intermediate slipped 59 cents to $70.18.

Analysts at Ritterbusch and Associates said in a note, "[The] energy complex continues to zig and zag as Middle East risk premium expands and contracts almost daily."

Hani Abuagla, senior market analyst at XTB Mena, added, "Geopolitical uncertainty could continue to drive crude prices up, as the conflict in the region returns to the forefront following a week of significant declines driven by worries about weakening Chinese demand."

The specific worry about the prospect of Israel retaliating against an earlier rocket attack from Iran is that the latter is on track to export around 1.5 million barrels per day (bpd) in 2024, up from an estimated 1.4 million bpd in 2023, and that damage to its infrastructure could cause major global supply disruptions.

Ironically, the other major worry is that global demand is eroding anyway, and a survey released Thursday stoked this fear by showing that Euro zone business activity stalled again this month despite firms barely increasing their prices.

Two other studies released Thursday suggested that optimism among UK business has declined as government tries to achieve raising taxes while also boosting growth in its latest budget.

But the energy landscape may not be as bleak as many fear: Bloomberg pointed out that "While crude consumption has faltered in top importer China, even as authorities add stimulus, there have been stronger signals from the U.S., with refinery processing running at a six-year seasonal high; investors are also counting down to next month's close-fought U.S. election."

In other oil news on Thursday, anonymous sources with knowledge of confidential data told media that recent testing has found that the gravity of WTI Midland is between 41 and 44 degrees; this triggered worries that the lighter the Permian crude gets, the chances are it could fall into the super light category and oblige refiners to make substantial infrastructure upgrades in order to process it.

It could even influence the price of Brent, as WTI Midland is now part of the Platts assessment of the Dated Brent.