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Oil prices drop amid Israel-Hamas conflict and 2024 US car demand worries

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2023-11-09

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Global oil prices dropped to new three-month plus lows on Wednesday. Fears related to the Israel-Hamas conflict in the Middle East took a backseat to concerns about the strength of demand in 2024, particularly from US car drivers. This marked the third consecutive daily decline for the prices of the world's two major marker crudes, West Texas Intermediate and Brent.

The decline in oil prices is expected to increase selling pressure on ASX-listed oil and gas stocks. Additionally, the fall in gold prices will likely result in gold stocks failing to perform well.

West Texas Intermediate (WTI) oil fell by 2.7% to approximately $75.57, its lowest point since mid-July. Brent crude traded below $80 a barrel for the first time since early July, settling at around $79.45 a barrel in early Asian trading.

These recent drops have pushed oil prices below the levels seen on October 6 before the Hamas attack, and they are expected to contribute to a reduction in consumer price inflation in the coming months. US 10-year bond yields also dipped to around 4.51%, matching their levels from the previous Friday.

Both the US dollar and the Aussie dollar fell, with the latter trading just above 64 US cents in early Asian trading on Thursday.

Unofficial surveys indicated an increase in US oil stocks, as the official figures were delayed by a week while the Energy Information Administration (EIA) updated its computer systems.

Further dampening the outlook, the EIA reversed its previous forecast for a 100,000 barrel per day rise in US oil demand in its Short-Term Energy Outlook for November. Instead, it predicted a 300,000 barrel per day drop in demand for the year, with per capita petrol demand expected to reach its lowest point in decades in 2024.

Gold prices also declined, dropping 0.9% or over $18 to approximately $1,955 per ounce on Comex. Meanwhile, Comex copper fell by more than 1% to $3.63 per pound.

On a positive note, Singapore iron ore prices increased on Wednesday, finishing at around $124.40 per tonne after reaching $126 per tonne during trading.

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