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Crude futures snapped a three-session rally on Tuesday, surrendering the previous day’s strength triggered by escalating Middle East tensions and news that Libya’s rival eastern government was shutting down most of the country’s oil production, as well as Fed Chair Jerome Powell’s recent remarks signaling the start of monetary policy easing.
Global crude prices traded with a “downside bias” compared to last month, “responding to concerns about global demand, even as physical markets remain tight,” analysts at ICICI Bank wrote, according to Marketwatch, but the extent of the downside has been “limited by ongoing geopolitical tensions as Israel-Hezbollah tensions appear to have escalated,” as well as the reports out of Libya.
But “today’s price pullback, although significant, still fell within range of a normal and deserved correction following a substantial three-day $6/bbl advance,” Ritterbusch analysts said, according to Reuters.
Front-month Nymex crude (CL1:COM) for October delivery ended -2.4% to $75.53/bbl, and front-month October Brent crude (CO1:COM) closed -2.3% to $79.55/bbl.
Also, front-month Nymex natural gas (NG1:COM) fell for the sixth straight session, with the September contract -2.6% to $1.904/MMBtu, on continuing concerns about the large storage surplus.
ETFs: (NYSEARCA:USO), (BNO), (UCO), (SCO), (USL), (DBO), (DRIP), (GUSH),(USOI), (UNG), (BOIL), (KOLD), (UNL), (FCG)
Goldman Sachs has lowered its 2025 average Brent crude forecast to $77/bbl from $82, pointing to higher oil inventories and sluggish demand from China.
“This adjustment reflects upside surprises to OECD inventories relative to our June balance expectations and a lower fair value estimate for long-dated prices,” Goldman analysts led by head of oil research Daan Struyven wrote.
Goldman considered the potential impact on U.S. shale crude producers if OPEC+ adds supply, saying “prices could significantly undershoot in the short term, especially if OPEC were to strategically discourage U.S. shale growth more forcefully, or if a recession were to reduce oil demand.”
