Oil prices experienced a downward trend on Monday in response to significant developments in the Middle East conflict. The decline followed Israel’s decision to withdraw more troops from Gaza and engage in fresh talks aimed at achieving a potential ceasefire after six months of intense hostilities.
Brent crude futures saw a decline of 90 cents, marking a 1% drop, with prices settling at $90.27 per barrel by 1000 GMT. Similarly, U.S. West Texas Intermediate crude experienced a decrease of 86 cents, or approximately 0.9%, reaching $86.05.
Notably, the previous week witnessed a surge in oil prices by about 4% due to escalating geopolitical tensions in the region.
Israel’s announcement on Sunday of further troop withdrawals from southern Gaza, leaving only one brigade behind, reflects ongoing efforts to ease the strain on reservists. This move is part of Israel’s broader strategy initiated at the beginning of the year and comes amidst mounting pressure from allies to address the humanitarian crisis in Gaza.
Simultaneously, efforts to broker a ceasefire were revived as both Israel and Hamas dispatched delegations to Egypt for talks ahead of the Eid holidays. However, despite these diplomatic efforts, a Hamas official reported on Monday that no substantial progress was achieved during the latest round of discussions.
The fluidity of the situation in the Middle East continues to influence oil market dynamics, with investors closely monitoring developments and their potential impact on supply and demand fundamentals.
The oil market’s demand outlook remains influenced by various factors, including recent developments in the global economy. The U.S. employment report released on Friday indicated a strong end to the first quarter, suggesting economic resilience and potentially delaying anticipated interest rate cuts by the Federal Reserve later this year.
Investors are closely monitoring upcoming data releases, particularly the consumer price index data from both the U.S. and China this week. These figures will provide further insights into the potential timing of Federal Reserve policy adjustments and offer assessments of the economic conditions in the world’s largest oil-consuming nations.
Despite the current lack of substantial physical drivers to push oil prices beyond the $90 to $100 per barrel range, according to John Evans of broker PVM, several geopolitical factors are contributing to market dynamics. The ongoing crises in the Middle East and the Ukraine-Russia conflict, coupled with heightened interest from major investors, create a delicate balance. Evans suggests that while there may be limited downside potential at present, the oil market remains susceptible to geopolitical tensions and investor sentiment.
Sources: moneycontrol.com