With the Israel-Hamas war intensifying, crude oil prices were expected to surge over concerns of supply disruptions in case hostilities widened. Yet, counter-intuitively, prices have been weakening. On Wednesday, they fell more than 4% to a three-month low, with Brent crude settling at $81 a barrel. This, despite voluntary output cuts reaffirmed by Saudi Arabia and Russia on top of the ones enforced earlier by the Opec cartel. Crude oil is currently down 17% from a $98 recent-high hit in September.

This price softness is a sign that weakness in China’s economy outweighs the hardening effect of war risks. China is the largest consumer of this fossil fuel and any reduction in its voracious appetite depresses its demand. And then there’s also strong supply. American shale-oil rigs recently upped their output, even as Iran continues to circumvent US sanctions (as the Islamic Republic has openly been doing since the Ukraine war with Washington looking the other way) to export an estimated 1.5 million barrels daily.

So unless the war in West Asia engulfs more countries (rather than proxies), China’s slump could relieve India of an even more burdensome oil bill.

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Crude paradox: Global price slip even as war rages in West Asia

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09.11.2023

With the Israel-Hamas war intensifying, crude oil prices were expected to surge over concerns of supply disruptions in case hostilities widened. Yet, counter-intuitively, prices have been weakening. On Wednesday, they fell more than 4% to a three-month low, with Brent crude settling at $81 a barrel. This, despite voluntary........

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