LONDON: Oil prices fell on Tuesday, with an uncertain outlook for global demand knocking value off crude futures contracts, despite some risk premium from the Israel-Hamas conflict.
Brent futures dipped 80 cents or 0.96% to $82.76 a barrel by 1255 GMT.
U.S. West Texas Intermediate (WTI) crude for April delivery fell 92 cents, or 1.17%, to $77.54 a barrel, after earlier paring $1. The March WTI contract lost 51 cents or 064% to $78.68 a barrel ahead of its expiry during the session.
There was no settlement for WTI on Monday due to a U.S. public holiday.
Crude markets were “marginally lower” in “quiet trading over the Presidents’ Day holiday in the U.S. and as demand concerns offset ongoing Middle Eastern geopolitical tensions”, IG market analyst Tony Sycamore said in a note.
Israel now plans to storm the city of Rafah, where more than 1 million of the 2.3 million Palestinians in Gaza have sought shelter, prompting international concern that an assault would sharply worsen the humanitarian crisis in Gaza. The U.N. has warned it “could lead to a slaughter”.
Various countries are increasing efforts to secure a ceasefire as the threat of an assault on Rafah looms.
A total of 29,195 Palestinians have been confirmed killed and 69,170 injured in Israeli strikes on Gaza since October 7, the Gaza health ministry said in a statement on Tuesday.
Shipping has suffered as the conflict threatens to escalate in the Middle East, with energy markets particularly vulnerable. In support of Palestinians, Iran-aligned Houthis have increased attacks on shipping lanes in the Red Sea and Bab al-Mandab Strait, with at least four more vessels hit by drone and missile strikes since Friday.
But the conflict in the Middle East, one of the world’s major oil-producing regions, has not been enough to counter crude investors’ worries about flagging global demand.
A bearish International Energy Agency (IEA) report last week revised the 2024 oil demand growth forecast downward, to almost a million barrels a day less than producer group OPEC’s outlook.
The IEA estimated global oil demand will grow by 1.22 million barrels per day (bpd) this year, while OPEC’s growth forecast is 2.25 million bpd.
The two are clashing in part over the shift to renewable and cleaner energy, with the IEA, which represents industrialised countries, predicting oil demand will peak by 2030 while OPEC expects oil use to keep rising for the next two decades.