Crude oil prices were on the rise earlier today as China reported strong retail sales and GDP growth figures. However, benchmarks remained on course for a substantial weekly loss after their fast jump last week as focus on demand once again outweighed any geopolitical worry.
The U.S. Energy Information Administration’s latest weekly oil inventory report helped fuel a relatively bullish sentiment, helping the benchmarks higher as it reported yet another weekly draw, but it appears that demand remains a bigger priority for traders.
The focal point of that demand priority is, of course, China, which earlier in the month said it would inject further stimulus into the economy to accelerate growth. That spurred prices higher until economic data did not dampen sentiment and prompting another stimulus announcement by the authorities in Beijing. That second announcement, however, did not detail the size of the help, which snapped oil traders out of their bullish mood.
Fresh data about Chinese refining could add to the downward pressure, as it fell to the lowest in three months in September amid scheduled maintenance.
At the same time, geopolitical risks just jumped this week after Israel said it had killed the leader of Hamas, Yahya Sinwar. Israeli forces killed Sinwar in Gaza, prompting an immediate response from Lebanon’s Hezbollah, which said it would escalate the fight with the Israeli state.
According to U.S. officials, Sinwar’s death could open the way to a ceasefire, with State Department spokesman Matthew Miller calling the Hamas leader “the chief obstacle” to an agreement as he refused to negotiate with Israel for months.
“That obstacle has obviously been removed. Can’t predict that that means whoever replaces (Sinwar) will agree to a ceasefire, but it does remove what has been in recent months the chief obstacle to getting one,” Miller said, as quoted by Reuters.
Judging by Hezbollah’s reaction, however, this might be a too optimistic view of the immediate future of the Middle East, with the risk of broader escalation once again heightening.