(Bloomberg) -- Oil held near $74 a barrel after slumping on Tuesday, as traders continued to monitor the risk of escalation in the Middle East and the outlook for next year.
Brent and West Texas Intermediate flipped between small gains and losses. The benchmarks both sank more than 4% in the prior session after reports that Israel had agreed to avoid oil facilities in its planned response to Tehran’s recent missile strike.
On Tuesday, Israeli Prime Minister Benjamin Netanyahu asserted that the country was free to act as it chose in a counter-strike. Israel launched a fresh attack in southern Beirut on Wednesday, despite Lebanon saying that it received some form of guarantee from the US that Israel will ease its offensive.
Crude has had a roller-coaster ride this month, with prices buffeted by tensions in the Middle East, as well as China’s efforts to revive domestic growth. Traders have also been weighing the market’s outlook into next year, with the International Energy Agency on Tuesday flagging prospects for a global glut.
“We would be somewhat surprised if the geopolitical risk premium has disappeared for the time being,” said Norbert Rucker, an analyst at Julius Baer. “Looking beyond the geopolitical noise and sentiment swings, we see the market heading toward a supply surplus by 2025.”
Later Wednesday, traders will also monitor an industry report on US stockpiles for an insight into consumption in the biggest oil user before official data on Thursday. Last week, stockpiles swelled by 5.8 million barrels, their biggest increase since late April.
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