Oil prices are falling further despite reports of intense fighting in southern Lebanon, following the launch of a ground offensive by Israel, with analysts at Goldman Sachs predicting further declines in crude prices.
Brent crude futures prices dropped 2.2% to $70.10 per barrel on Tuesday morning, while the US gauge, West Texas Intermediate, is down 2.4% at $66.53.
Analysts at Goldman Sachs said the fall in oil prices was due to "softer realised and expected demand" from China and better-than-expected oil inventories.
Israeli security officials said the raids in Lebanon were limited to a "specific area and specific time", saying the incursion was "walking distance" from the border to Israel.
Hezbollah said in a statement that earlier missiles fired at Tel Aviv were targeting military positions in the suburbs of the city.
Airlines have cancelled flights to Tehran up to and including 14 October 2024, with Lufthansa suspending flights up to and including 26 October
HSBC today cut its 2025 Brent crude forecast by 8% to $70 on oversupply reasons, while Goldman Sachs predicted prices could fall to as low as $60 by the end of 2025 - back to levels not seen since early 2021. Citi made a similar prediction recently.
Goldman analysts said they see “limited” risks of prices being pushed higher by the Middle East conflict as the market is “shifting away” from the price support provided by Opec after Saudi Arabia last month reportedly abandoned its $100 price target.
As well as US production increasing, a political agreement in Libya is expected to see output from the country increase rapidly too.
Goldman analyst Daan Struyven said: “High spare capacity skews the risks to our price forecast to the downside, and we continue to estimate that Brent could fall to the low $60s by December 2025 if Opec fully reverses the extra voluntary supply cuts through November 2025.”
Fiona Cincotta at City Index agreed, saying crude prices were lower as the "prospect of increased supply from OPEC+ offsets supply concerns in the Middle East", with the oil producers cartel expected to gradually unwind some production cuts starting in December, raising concerns about an oversupplied market next year.
"Tensions in the Middle East are ramping up, which is offering some support to oil prices. However, given that oil production hasn't been materially affected yet, the risk premium on oil remains relatively low.
"This could change, and the risk of supply disruption would increase dramatically if Iran became more directly involved."
Gold prices picked up, though, from a week's low of $2,627 overnight to $2,648.