© Reuters. The sun sets behind the chimneys of the Total Grandpuits oil refinery, southeast of Paris, France, March 1, 2021. REUTERS/Christian Hartmann
By Colleen Howe
BEIJING (Reuters) – Oil prices edged off in early Asian trading on Wednesday on continued bearish fundamentals, following gains in the previous session amid an escalating conflict in the Middle East.
The March futures, which expires today, fell 37 cents to $82.50 a barrel by 0146 GMT. The more actively-traded April contract fell 24 cents to $82.26 a barrel.
U.S. West Texas Intermediate crude ticked down 18 cents to $77.64.
“The main issue with turning outright bullish on here is the technical picture remains bearish and is yet to catch up with recent events,” including a deadly drone attack on U.S. troops near the Jordan-Syria border last week, said Tony Sycamore, a market analyst with IG.
But ANZ analysts said in a note that “a strong military response from the U.S.” to the drone attack “could still trigger a strong reaction from the market.”
President Biden said he had decided how to respond to the attack without giving further details, but added that he wanted to avoid a wider war in the Middle East.
Iran-aligned Iraqi armed group Kataib Hezbollah – which the U.S. Pentagon had suggested could be behind the attacks, though no final assessment had been made – announced on Tuesday the suspension of all its military operations against U.S. troops in the region.
In the Israel-Palestinian conflict, Hamas said on Tuesday it had received and was studying a ceasefire proposal. It appeared to be the most serious peace initiative since the war’s first and only brief ceasefire which fell apart in November.
But Sycamore said the market was concerned that a ceasefire in Gaza would not necessarily put a halt to attacks by Iran-backed Houthis on ships in the Red Sea, which have disrupted global shipping and oil trading.
Bearish factors include a deepening crisis in China’s real estate sector following the liquidation of property company China Evergrande (HK:) Group, which has raised concerns about demand from the world’s largest crude importer. Markets are also awaiting the release of China’s PMI data on Wednesday, which will likely show a contraction for a fouth straight month.
