Oil prices tumbled more than 4% on Tuesday as supply fears faded after a Washington Post report signaled Israel would avoid targeting Iran’s petroleum production. A glut of supply forecasted by the International Energy Agency also weighed on prices.

West Texas Intermediate (CL=F) dropped to settle at $70.58 per barrel, while Brent (BZ=F), the international benchmark price, fell to close at $74.25.

The declines were partly in response to a Washington Post article published Monday that said that Prime Minister Benjamin Netanyahu told the Biden administration that Tel Aviv would avoid targeting Iran’s nuclear or oil facilities when it retaliates against a ballistic missile attack by Iran earlier this month.

Oil prices had previously traded up on concerns that Israel would target Iranian oil fields. Israel said in a statement to Reuters that although it takes into consideration US opinions, it will decide what actions to take against Iran based on its own national interests.

Meanwhile, the International Energy Agency said world oil demand was on track to expand just shy of 900,000 barrels per day, and almost 1 million barrels per day in 2025, "marking a sharp slowdown" from the levels seen over the 2022-2023 period.

"China underpins the deceleration in growth, accounting for around 20% of global gains both this year and next year, compared to almost 70% in 2023," said the report.

The IEA stated, "In the absence of a major disruption, the market is faced with a sizeable surplus in the new year."

"Overall right now, it's a bit of a bearish outlook for oil given China's economy and given Middle East tensions aren't escalating at this moment," GasBuddy head of petroleum analysis Patrick De Haan told Yahoo Finance on Tuesday morning.

On Tuesday oil declined about 2% after commentary from China's Finance Minister over the weekend lacked specific details, including the size of the country's stimulus needed to imply increased crude demand by the world's largest oil importer.

Also on Monday, OPEC cut its projection for the third consecutive month, primarily because of China. The group now sees demand growing by 1.9 million barrels per day this year, down from 2 million in its previous forecast, according to the group's monthly report.

Ines Ferre is a senior business reporter for Yahoo Finance. Follow her on X at @ines_ferre.

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