(Bloomberg) -- Oil dropped — after advancing by almost 2% on Monday — as broader financial markets carried a risk-off tone, while traders also continued to track tensions in the Middle East between Israel and Iran.
Brent dropped below $74 a barrel, while West Texas Intermediate was near $70. Investors are still waiting to see how Israel will retaliate against Iran for a recent missile barrage, as well as subsequent attacks by Tehran-backed proxies. In wider markets, Asian stocks fell after US losses.
Crude has been buffeted this month — with global benchmark Brent swinging in a more-than-$11 range — as conflict in the Middle East has raised the potential for disruptions to supplies. At the same time, China has moved to support growth with stimulus, supporting prices, but investors remain wary that the global oil market may swing to a surplus in the coming quarters.
Brent’s prompt spread — the difference between its two nearest contracts — has narrowed in recent weeks, suggesting physical conditions are becoming less tight. The differential was 35 cents a barrel in backwardation, compared with 69 cents about a month ago.
Stockpiles have also been in focus. The volume of crude held at the closely watched US hub at Cushing, Oklahoma, has expanded for the past four weeks, the longest run of inflows since early March. An industry estimate on the most recent shift is due later on Tuesday, with official data due the next day.
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