Oil prices experienced a third consecutive session of decline on Tuesday as concerns mounted over sluggish economic data from key European economies, including Germany, the euro zone, and Britain. These economic indicators weighed on the outlook for energy demand, leading to a drop in oil prices.
Brent Crude: Brent crude futures fell by $1.76 or 2% to settle at $88.07 per barrel.
U.S. West Texas Intermediate (WTI) Crude: U.S. WTI crude futures decreased by $1.75 or 2.1% to close at $83.74 per barrel.
Notably, the Euro zone witnessed a surprise downturn in business activity data, indicating a possible slide toward recession. Germany’s economic readings reinforced the view of a recession in that country, while British businesses reported a monthly decline in activity, raising concerns about a potential recession in the United Kingdom ahead of the Bank of England’s upcoming interest rate decision.
Mizuho analyst Robert Yawger highlighted the growing concerns about the global economy, stating, “There is definitely a dialogue on about the global economy being worse this week than it was last week.” He also noted that ongoing discussions at the Future Investment Initiative event in Saudi Arabia were contributing to these concerns.
In contrast, the United States saw an increase in business output in October, as the manufacturing sector emerged from a five-month contraction. The relative strength of the U.S. economy had the effect of strengthening the dollar, making dollar-denominated oil more costly for holders of other currencies.
John Kilduff, a partner at New York-based Again Capital, emphasized the persisting challenges posed by demand in the oil market, despite ongoing concerns about the situation in the Middle East and Saudi Arabia’s efforts to curtail supply.
However, the American Petroleum Institute’s weekly storage report indicated substantial declines in both crude oil and fuel inventories, signaling robust demand in the United States. Official storage figures from the U.S. Energy Information Administration are expected on Wednesday morning at 10:30 a.m. EDT.
Following the release of the API report, both Brent and WTI benchmarks briefly rebounded in low-volume post-settlement trading. Nonetheless, they remained down by approximately 2% as of 4:50 p.m. EDT.
Additionally, the release of hostages from Gaza and intensified diplomatic efforts to manage the conflict between Israel and Hamas have reduced the risk premium that had previously pushed Brent prices to their highest level in a month.
In a separate development, the International Energy Agency (IEA) stated on Tuesday that it anticipates fossil fuel demand to peak by 2030 based on the current policies of governments around the world.
