Oil prices bounced back in Asian trading, recovering from a more than 3% drop in the previous session, as concerns over potential supply disruptions in the Middle East took precedence over lackluster economic data from China.December Brent crude futures, set to expire on Tuesday, climbed by 65 cents, or 0.74%, reaching $88.10 per barrel by 0637 GMT. The more actively traded January Brent crude futures also posted gains, rising by 63 cents, or 0.73%, to hit $86.98.
In the face of investor caution ahead of the upcoming U.S. Federal Reserve meeting, oil prices had experienced a decline on the previous day, even as Israel’s actions in Gaza escalated. According to Leon Li, an analyst at CMC Markets in Shanghai, “If this evolves into a full-scale invasion and there is involvement from Iran, tighter supply worries could resurface.” While oil prices corrected upward on Tuesday, their future trajectory hinges on whether Israel opts to expand its ground offensive. Analysts at ING noted that “Disruptions to Iranian oil flows remain the most obvious risk to the market.” These disruptions could potentially result in a loss of supply ranging between 500,000 barrels per day (bpd) and 1 million bpd if the United States enforces sanctions more rigorously once again. However, as of now, developments in the Middle East have not yet significantly affected oil supply.