Shafaq News/Oil prices fell more than $1 on Tuesday as traders took profits from a rally inthe previous session that lifted the market to its highest level in over amonth amid fears that the Middle East could be on the brink of a region-widewar.
Brent crudefutures fell $1.17, or 1.5%, to $79.76 per barrel at around 0420 GMT. U.S. WestTexas Intermediate futures fell $1.19, or 1.6%, to $75.95 a barrel.
Bothcontracts rose over 3% on Monday to their highest levels since late-August,adding to last week's rally of 8%, the biggest weekly gain in over a year, onworries that escalating hostilities could disrupt oil supply from the MiddleEast.
Fighting inthe Middle East intensified after Iran-backed Hezbollah fired rockets atIsrael's third-largest city, Haifa, and Israel looked poised to expand itsoffensive into Lebanon, a year after the Hamas attack on Israel that sparkedIsrael's ongoing war in Gaza.
"Thegeopolitical tensions in the Middle East rock on, but there has been someparing of exposure lately on some expectations that any disruptions to energysupplies may be more measured," said Yeap Jun Rong, market strategist atIG.
"Ofcourse, more clarity still awaits on how Israel will retaliate towards Iran,and we may expect prices to remain supported amid the pricing of geopoliticalrisks."
The oilprice rally began after Iran launched a missile barrage on Israel on Oct. 1.Israel has sworn to retaliate and is weighing its options, with Iran's oilfacilities considered a possible target.
However,some analysts say an attack on Iranian oil infrastructure is unlikely, warningthat oil prices could face considerable downward pressure if Israel focuses onany other target.
Even if anattack targets Iranian oil facilities, there is 7 million barrels per day ofspare supply capacity within the Organization of Petroleum Exporting Countriesto make up for the loss of its oil output, ANZ Bank analysts noted on Friday.
Developmentsin the Middle East will also do little to change the oil demand outlook, whichcontinues to look somber, said Phillip Nova analyst Priyanka Sachdeva, addingthe market was awaiting U.S. inflation data on Thursday for a view on theworld's biggest economy.
Whileinvestors have been concerned about slow growth dampening fuel demand in China,the country's National Development and Reform Commission (NDRC) on Tuesday saidit is fully confident of achieving its full-year economic targets.
In the U.S.,Hurricane Milton intensified into a Category 5 storm on its way to Floridaafter forcing at least one oil and gas platform in the U.S. Gulf of Mexico toshut on Monday.
Traders willbe also looking out for the latest U.S. crude oil inventory data, with analystsexpecting stocks to rise by 1.9 million barrels in the week ended Oct. 4,according to a preliminary Reuters poll.
The AmericanPetroleum Institute is due to post its tally of U.S. stockpiles at 2030 GMT onTuesday, followed by the official tally from the Energy InformationAdministration at 1430 GMT on Wednesday.
(Reuters)