Oil falls over 3% as concerns about Mideast supply ease
Brent crude futures fell $1.29 cents, or 1.4%, to $89.19 a barrel by 1252 GMT, while U.S. West Texas Intermediate crude was down $1.47, or 1.7%, at $84.07.
Crude had jumped 3% on Friday after Israel stepped up ground incursions into Gaza, stoking worries the conflict could expand in a region that accounts for a third of global oil output. However, that concern was fading on Monday, analysts said.
“There is a propensity for market users in all their guises to have at least some oil length going into the weekends and when the fear of conflict spread shows no validation come the early hours of Monday mornings’ openings, that fear hedge is ordinarily unwound,” said John Evans of oil broker PVM.
“Despite an escalation in the Hamas-Israel war, the ground invasion was widely expected,” added CMC Markets analyst Tina Teng. “The weekend playout signals no further expansion into a wider regional war, which caused a retreat in oil prices.”
Israeli troops and tanks attacked Gaza’s main northern city from the east and west on Monday, three days after it began ground operations in the Palestinian enclave.
Investors are also focused on the outcome of Wednesday’s Federal Reserve meeting as well as on what earnings from the likes of tech giant Apple Inc might indicate regarding the prospects for economic slowdown. The Fed is widely expected to keep interest rates unchanged, while the central banks of Britain and Japan also set to review their policies this week.
Meanwhile, German inflation eased in October, pointing to a substantial cooling in headline inflation in the euro zone.
China reports its October manufacturing and services PMIs this week, with investors looking out for more signs that the economy of the world’s top crude importer is stabilising.
On Monday, the World Bank said it expected global oil prices to average $90 a barrel in the fourth quarter and fall to an average of $81 in 2023 as slowing growth eases demand, but warned that an escalation of the latest Middle East conflict could spike prices significantly higher.
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