Oil snaps Israel-Hamas war-induced rally, slides over $1 on demand concerns
Oil prices oil fell more than $1 a barrel on Tuesday, October 10, snapping the previous session’s rally where they rose 5 per cent, as traders focused on demand levels but still cautious as they watched for potential supply disruptions amid military clashes between Israel and the Palestinian Islamist group Hamas.
Brent crude was down $1.18 at $86.97 a barrel while US West Texas Intermediate (WTI) crude fell $1.24 to $85.16 a barrel. Both benchmarks had fallen by more than $1 in earlier trade. Brent and WTI had surged more than $3.50 on Monday as the clashes raised fears that the conflict could spread beyond Gaza, according to news agency Reuters.
Back home, on the Multi Commodity Exchange (MCX), crude oil futures due for a October 19 expiry, was trading 0.24 per cent lower at ₹7,167 per bbl, having swung between ₹7,101 and ₹7,228 per bbl during the session so far, against a previous close of ₹7,184 per barrel.
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What’s weighing on crude oil prices?
-Hamas launched the largest military assault on Israel in decades on Saturday, while Israel pounded the Gaza Strip on Tuesday with the fiercest air strikes in the 75-year history of its conflict with the Palestinians.
-While Israel produces very little crude oil, markets worried that if the conflict escalates it could hurt Middle East supply and worsen an expected deficit for the rest of the year. Israel’s port of Ashkelon and its oil terminal have been shut in the wake of the conflict, sources told Reuters.
-Stricter enforcement of US sanctions on Iranian crude exports and any blockades or attacks on vessels in key shipping lanes are the main risks, while the conflict also transforms the landscape for any potential US, Saudi and Israeli security pact, according to Bloomberg.
Where are oil prices headed?
-“Oil prices might remain buoyed owing to rise in risk premium, as middle east is a source of one third of world’s crude,” said Ravindra Rao, CMT, EPAT, VP-Head Commodity Research, Kotak Securities.
-Analysts say that oil has a disproportionate impact on global financial markets due to its pivotal role in the world economy. ‘’Its interconnectedness with various sectors, and its potential to influence broader economic conditions and investor sentiment, according to deVere Group.
“I would urge investors to avoid knee-jerk reactions to the oil price surge and geopolitical tensions that are creating the market turbulence. Investors are likely to profit by sitting still and not selling and then having to buy back at higher prices,” said Nigel Green CEO of deVere Group.
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Updated: 10 Oct 2023, 10:23 PM IST
