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Oil prices held steady in Asian trading on Wednesday, with uncertainty surrounding the Middle East conflict balancing against bearish fundamentals. Brent crude futures rose slightly to $77.29 a barrel, while U.S. West Texas Intermediate futures also saw a small increase to $73.60 a barrel.
The market experienced a sharp drop of over 4% in the previous session due to a possible Hezbollah-Israel ceasefire, but concerns remain over a potential Israeli strike on Iran's oil facilities. Analysts at Macquarie warned of additional volatility as the market assesses bearish factors against supply risks from escalating tensions in the Middle East.
The recent rally in oil prices followed Iran's missile attack on Israel on Oct. 1, resulting in an 8% gain for the week, the largest in over a year. However, Hezbollah's stance on a truce in Gaza has added to the uncertainty surrounding the region.
Data indicating a significant increase in oil stocks last week, coupled with weaker demand forecasts, have contributed to the overall bearish sentiment. The U.S. Energy Information Administration revised its 2024 global oil demand growth forecast lower due to sluggish industrial production in key economies.
Furthermore, Hurricane Milton is set to make landfall on Florida's Gulf Coast, potentially disrupting gasoline supply to the state. This has led to the closure of ports and energy infrastructure in preparation for the storm.
Market analyst Tony Sycamore suggests that the current trading range for oil prices may be higher, with uncertainties surrounding the hurricane impact and geopolitical tensions. Traders are closely monitoring the situation to gauge the potential outcomes.
In conclusion, the combination of geopolitical tensions, supply risks, demand concerns, and natural disasters have created a complex environment for oil markets. Investors and consumers alike should stay informed and cautious as these factors can impact oil prices and the broader economy.