As the Middle East war rages, oil prices climb, and traders pay attention to declining inventories

As traders dismissed prospects of a truce in the Middle East and concentrated on a tighter global supply and demand balance, oil prices increased for the second straight day on Tuesday.

At 12:24 a.m. ET (1624 GMT), Brent oil futures for December delivery were up $1.94, or 2.6%, to $76.23. On the final day of the contract as the front month, U.S. West Texas Intermediate futures for November delivery were up $1.98, or 2.8%, at $72.54 a barrel.

In what Washington thinks would be a chance for peace, U.S. Secretary of State Antony Blinken visited Israeli Prime Minister Benjamin Netanyahu Tuesday in the first major push for a truce in the Middle East since Israel assassinated Hamas leader Hamas last week.

But according to Bob Yawger, director of energy futures at Mizuho, oil traders were not persuaded that this drive would differ significantly from Blinken’s 11 prior trips to the area since the start of the Gaza War last year.

According to Alex Hodes, an energy analyst at brokerage StoneX, oil traders are also considering how China’s stimulus policies and a tightening global supply and demand balance could affect fuel consumption.

After Beijing lowered benchmark lending rates in an attempt to boost China’s faltering economy, Brent and WTI both increased by around 2% on Monday, somewhat recovering from last week’s more than 7% loss.

“I think that it is more of a signal that they are willing to support demand and we have perhaps seen the low point in demand,” Hodes stated. He cautioned that the stimulus alone might not have a significant short-term impact on China’s oil demand.

As the world’s second-largest economy electrifies its automobile fleet and slows its expansion, China’s oil demand growth is predicted to remain modest in 2025, the president of the International Energy Agency said Monday.

However, the president of the state-owned Saudi oil behemoth, Saudi Aramco (2222.SE), stated Monday that the company is pretty optimistic about China’s oil consumption, particularly in light of the government’s stimulus plan that intends to increase GDP.

According to Hodes, global oil stockpile data indicates a fourth-quarter supply deficit, which could boost oil prices in the coming months despite concerns about China’s consumption.

“Global petroleum stockpiles are currently below 2023 levels and are still in a drawdown phase. The latest week indicated a re-acceleration, and the trend is anticipated to continue,” Hodes stated.

According to a preliminary Reuters poll, U.S. crude oil stockpiles probably increased by around 100,000 barrels last week, while distillate and gasoline stocks decreased by more than 1.5 million barrels apiece. The week ending October 11 saw a 2.2 million barrel decline in crude stockpiles.