09:13 AM EDT, 10/29/2024 (MT Newswires) -- Oil prices rebounded early on Tuesday from yesterday's 6% drop even as worries abated that war will spread in the Middle East and the World Bank said it expects a supply glut to begin suppressing prices next year.

West Texas Intermediate crude oil for December delivery was last seen up US$0.97, or more than 1%, to US$68.35 per barrel, while December Brent crude, the global benchmark, also traded more than 1% higher at US$72.36.

Prices on Monday plunged the most in two years as traders removed the commodity's war premium after Israel on the weekend responded to Iran's Oct.1 attack with a limited strike on military and industrial targets in the country, avoiding energy infrastructure and easing fears over a spreading Middle Eastern war that would cut into oil supply.

"Israeli Prime Minister Benjamin Netanyahu said, 'the attack on Iran was precise and powerful, achieving all its objectives,' which very much sounds as if this bout of hate thy neighbor is over," PVM Oil Associates wrote. "The US seems to think so, or at least is publicly prescribing to a cooling. President Biden is quoted on various media as saying that this should be the end of the direct fire between the two."

Yet despite Tuesday's early rebound, the market's outlook remains bearish as Chinese demand remains weak and supply is on the rise. The World Bank in its October Commodity Markets Outlook said it sees oil prices falling by 6% next year on rising supply even as it expects OPEC+ to delay the return of 2.2-million barrels per day of voluntary production cuts scheduled to begin in December.

"Global oil supply is expected to reach approximately 105 mb/d (million barrels per day) in 2025, up by 2 mb/d from 2024. Most of this increase is anticipated to occur in Brazil, Canada, Guyana, and the United States, with OPEC+ production only edging up," the bank said. "Global oil consumption is forecast to rise by about 1 mb/d per year in 2024-25-an annual growth rate below 1 percent ... Under these conditions, global oil supply is expected to exceed demand by an average of 1.2 mb/d next year-a degree of oversupply surpassed only during COVID 19-related shutdowns in 2020 and the 1998 oil price collapse."