Oil rebounded as traders assessed tensions in the Middle East, and the outlook for market balances heading into 2025.
Brent rose toward $76 a barrel, while West Texas Intermediate traded near $72. In the Middle East, US Secretary of State Antony Blinken held talks with Saudi Crown Prince Mohammed bin Salman in Riyadh about efforts to reach a cease-fire in Gaza and Lebanon. He had earlier traveled to Israel, which has vowed to strike back against Tehran for a missile attack earlier this month.
Oil has seen volatile trading this month as traders assess supply risks in the Middle East, which pumps about a third of global supplies, as well as a mixed picture on demand. While crude consumption has faltered in top importer China, even as the authorities add stimulus, there have been stronger signals from the US, with refinery processing running at a six-year seasonal high. Investors are also counting down to next month’s close-fought US election.
“Mideast tensions and the economic outlook — as a proxy for global oil demand — are the key drivers,” said Vandana Hari, founder of Vanda Insights in Singapore. “Neither is sending any strong signals at the moment, and crude may remain broadly rangebound until that situation changes.”
To protect against the risk of a potential price spike driven by supply disruptions in the Middle East, traders are holding a record number of options contracts. Brent options open interest this week topped 4 million contracts for the first time — the equivalent of 4 billion barrels.
Crude’s midweek drop — when Brent closed more than 1% lower — came after data showed US inventories rose by more than 5 million barrels. Swelling American production is set to create a glut in 2025, while spare capacity in OPEC+ is near record levels, according to the International Energy Agency.
