Oil prices saw a decline today, following a 4% surge in the previous session, as cautious investors kept an eye on potential supply disruptions amidst ongoing military conflicts between Israel and Hamas. Brent crude slid by 37 cents to $87.78 per barrel at 1240 GMT.
WTI Crude Eases Oil Prices
U.S. West Texas Intermediate (WTI) crude also eased, down 40 cents to $85.98 per barrel. Both benchmarks had earlier witnessed a drop of over $1 in value. The surge on Monday was triggered by fears that the conflict might extend beyond Gaza. Hamas initiated a major military assault on Israel, while Israel retaliated with its most intense air strikes in 75 years of conflict with the Palestinians.
ING analysts pointed out that significant uncertainty still lingers across markets after the weekend attacks in Israel. They noted that oil markets are now factoring in a risk premium.
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Middle East Supply Worries
Although Israel’s crude oil production is minimal, market concerns revolve around the potential escalation of the conflict impacting Middle East supply, exacerbating an expected deficit for the remainder of the year.
In the wake of the conflict, Israel’s port of Ashkelon and its oil terminal have been closed, sources reported on Monday.
The United States, while lacking direct intelligence or evidence linking Iran to the attacks, suggested complicity. A White House spokesperson stated, “If the U.S. finds evidence directly implicating Iran, then the immediate reduction in Iran’s oil exports becomes a reality.”
Stabilizing Outlook
Energy analyst Vivek Dhar at CBA remains cautiously optimistic, stating, “We continue to believe that Brent oil will ultimately stabilize between $90-$100/bbl in Q4 2023.” He added that the Palestine-Israel conflict heightens the risk of Brent futures exceeding $100/bbl.
In a more positive development on the supply front, Venezuela and the U.S. have made progress in talks that may provide sanctions relief to Caracas, potentially allowing at least one additional foreign oil firm to purchase Venezuelan crude oil under certain conditions.
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