Crude Oil Prices Fall Amid Focus on Lebanon

Crude oil prices closed slightly lower on Tuesday, extending a decline of more than 6% from the previous session.

The drop followed news that Israeli Prime Minister Benjamin Netanyahu is seeking a diplomatic solution to the conflict in Lebanon, easing fears of further disruptions in the region.

Brent futures fell 30 cents (0.42%) to $71.12 per barrel, while West Texas Intermediate (WTI) in the U.S. lost 17 cents (0.25%) to $67.21 per barrel. Both benchmarks had climbed more than $1 per barrel earlier in the session, but gains reversed as geopolitical concerns softened. On Monday, the contracts hit their lowest levels since October 1, after an Israeli retaliatory strike on Iran over the weekend left Tehran’s oil infrastructure untouched.

Netanyahu will meet with Israeli ministers, military officials, and intelligence chiefs Tuesday night to discuss potential diplomatic solutions for the war in Lebanon, according to journalist Barak Ravid on X (formerly Twitter), citing two sources. Meanwhile, Iran’s Foreign Ministry spokesperson Esmaeil Baghaei warned that the country would use “all available tools” to respond to Israel’s attack.

Adding further pressure to the oil market is weaker demand from China, the world’s largest crude importer. Sluggish Chinese consumption continues to drag down global oil prices.

However, there is some optimism that demand will rebound. Murray Auchincloss of BP told Reuters that Chinese President Xi Jinping is expected to introduce new economic stimulus measures, which could help restore oil consumption growth.

Despite current challenges, the oil market remains balanced, with demand forecasted to average 104.5 million barrels per day this year, according to Saudi Aramco’s CEO.

Investors are also awaiting U.S. oil inventory reports to assess supply dynamics. The American Petroleum Institute (API) will release its weekly data later Tuesday, followed by the U.S. government’s report on Wednesday morning. A preliminary Reuters survey suggests that crude and gasoline inventories likely increased last week, while distillate stocks may have declined.

The combination of geopolitical developments and demand uncertainty will keep oil markets on edge in the coming days.