By Giulia Petroni


Here's a look at what happened in oil markets in the week of Oct. 28-Nov. 1 and what the focus will be in the days to come.


OVERVIEW: Oil prices are headed for weekly losses following a volatile week, with geopolitical risks on one hand and weak fundamentals on the other weighing on sentiment. Brent crude, the international oil benchmark, trades around $73 a barrel, while the U.S. oil gauge West Texas Intermediate is around $70 a barrel. Benchmarks fell 6% on Monday on news that Israel spared energy infrastructure in its retaliatory attack against Iran, but rebounded on positive signs over U.S. fuel demand and a Reuters report that The Organization of the Petroleum Exporting Countries and its allies might further delay their plans to hike output.


MACRO: Economists largely expect the Federal Reserve to cut interest rates by 25 basis points at their meeting next week, taking a more cautious approach. The latest U.S. data showed job growth slowed sharply last month, but the unemployment rate stayed steady at 4.1%. Meanwhile, the personal consumption expenditures price index--the Fed's preferred inflation measure--dropped to 2.1% last month on an annual basis, close to the central bank's goal of a 2% annual rate.

In China, the latest manufacturing PMI data showed manufacturing activity expanded for the first time in six months in October, sending positive signals after the central bank announced a series of steps to boost the economy in late September.


GEOPOLITICAL RISKS: Israel's retaliatory strike against Iran steered clear of oil and nuclear facilities, easing fears of an all-out war and supply disruptions in the region. Uncertainty around the extent of Israel's response to Iran's missile barrage earlier in October had kept markets on edge for days. The geopolitical risk premium to oil fell significantly after Israel's targeted response and renewed talks over a ceasefire deal, but tensions in the region remain high. On Friday, prices soared again following an Axios report that Iran is preparing a retaliatory strike on Israel in the coming days.


SUPPLY AND DEMAND: Traders have shifted their focus to fundamentals in the physical market among widespread concerns over a weaker demand outlook and an upcoming production increase from OPEC+.

The group of oil producing countries is scheduled to start raising output from December after already delaying its plan by two months--a move that would increase prospects of an oversupplied market next year. But a Reuters report this week said the group might delay the planned output hike by a month or more amid global price weakness.

Meanwhile, the latest weekly report from the Energy Information Administration showed U.S. crude stocks fell by 515,000 barrels to 425.5 million barrels in the week ended Oct. 25, against analysts' expectations of a 1 million-barrel rise, while gasoline inventories fell by 2.7 million barrels to 210.9 million barrels.


WHAT'S AHEAD: All eyes next week will be on the U.S., with the presidential election on Tuesday and the Fed's policy meeting on Wednesday and Thursday. Traders are wary of the far-reaching implications either of a Trump or Harris win, especially on the U.S. dollar, global economic policies and trade relations--all elements that deeply affect commodity prices trends.

Investors will also keep a close eye on Middle East developments and OPEC+ for any announcements on output plans. On Thursday, China is due to release its crude oil import figures, likely bringing demand concerns back into focus.


Write to Giulia Petroni at giulia.petroni@wsj.com


(END) Dow Jones Newswires

11-01-24 1354ET