(Bloomberg) -- Oil fell the most in more than two weeks, with the lackluster demand outlook for the world’s two largest economies outweighing geopolitical tensions in the Middle East.
West Texas Intermediate dropped 3% to settle near $74 a barrel. Prices have dropped amid signs of softness in China, the biggest oil importer, as economic growth has slowed and the decarbonization of the transportation sector has eroded some fuel demand.
“The positive correlation between oil and equity indices broke down,” which is “underlining the bears’ dominance,” Alex Kuptsikevich, FxPro senior market analyst, said in a note to clients. Selling is intensifying as crude prices approach key technical levels.
Meanwhile, traders are awaiting a potential retaliatory attack by Iran on Israel. Ceasefire efforts are being hampered by fresh disagreements between Israel and Hamas, and Iran-backed Palestinian groups claimed responsibility for what they said was a “suicide mission” in Tel Aviv on Sunday.
Elsewhere, production at Libya’s Waha oil field has returned to normal levels of about 300,000 barrels a day after pipeline maintenance was completed earlier than expected, according to people with knowledge of the situation. The nation’s Sharara field, however, remains offline and its central bank has been pulled into a dispute between the OPEC nation’s rival governments.
Despite the pullback in paper markets, timespreads are showing underlying strength in markets. The gap between the two nearest contracts for WTI has widened in a bullish, backwardated structure, with the prompt contract trading at a premium to the following one.
Traders are now looking for clues about the strategy of OPEC+, with member countries due to begin adding supplies in the next quarter.
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