Oil drops amid diplomatic moves to contain Israel-Hamas conflict; Brent at $91
Oil prices declined on Monday, October 23, as investors continued to focus on the situation in the Middle East, where diplomatic efforts are intensifying in an attempt to contain the conflict between Israel and Hamas. European Union leaders will call for a humanitarian pause in the conflict so that support can reach Palestinians in Gaza, with the leaders of France and the Netherlands set to visit Israel this week.
Brent crude futures fell 53 cents, or 0.58 per cent, to $91.63 a barrel. US West Texas Intermediate crude futures were down 70 cents, or 0.79 per cent, at $87.38 a barrel, according to news agency Reuters. Both benchmarks traded more than $1 a barrel lower than their previous settlement price at their lowest levels in Monday’s session.
Both oil benchmarks gained 1 per cent week-on-week gains for the last two weeks, on the possibility of supply disruption in the Middle East — the world’s biggest oil-supplying region — if the conflict were to spread.
Back home, on the Multi Commodity Exchange (MCX), crude oil futures due for a November 17 expiry, were last trading 2.08 per cent lower at ₹7,213 per bbl, having swung between ₹7,213 and ₹7,343 per bbl during the session so far, against a previous close of ₹7,366 per barrel.
Also Read: Domestic crude oil production at 2.4 MMT in September, imports rise 6.1% YoY: PPAC
What’s weighing on crude oil prices?
-The intensification of diplomatic efforts to prevent the Israel-Hamas conflict from further escalation could have calmed oil prices on Monday. Aid convoys started to arrive in the Gaza Strip from Egypt over the weekend. However, Israel continued its bombardment of Gaza on Monday after launching air strikes over southern Lebanon overnight.
-Elsewhere, US President Joe Biden last week announced the suspending of sanctions on Venezuela, after a Venezuelan government deal with the opposition. This could bring exports back to the market, but the extent to which this could mitigate the impact of supply risks in the Middle East is unclear.
-The benchmark US Treasury yield rose above 5 per cent to a 16-year high on Monday – which also weighed on crude prices. The surge in yields, which move inversely to prices, has been driven by an increase in government debt and supply of bonds around the world, as economic uncertainty leads investors to demand a greater premium to hold longer-dated bonds.
-UBS expects Brent prices to trade in the $90 to $100 a barrel range over the coming sessions. Money managers cut their net long US crude futures and options positions by 56,850 contracts to 183,351 in the week to October 17, as per the US Commodity Futures Trading Commission (CFTC).
-“WTI crude oil futures ended the previous week marginally higher, as Iran-backed militant attacks on US army bases in Iraq and Syria coupled with escalation in tensions after the hospital blast in Gaza raised supply concerns,” said Ravindra Rao, CMT, EPAT, VP-Head Commodity Research, Kotak Securities
‘’EIA data showed crude inventories continue to decline, while output rose to a record high of 13.2 mbpd during the previous week. Oil prices edged lower on Monday as the imminent ground invasion on Gaza strip has been delayed amid diplomatic efforts to secure the release of more hostages, easing concerns,” added Rao.
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Updated: 23 Oct 2023, 08:46 PM IST
