WEB DESK: Global oil prices dropped on Monday after experiencing their largest weekly increase in over a year. The decline comes as concerns about oversupply and reduced demand overshadow fears of a potential escalation of conflict in the Middle East that could disrupt exports from this key oil-producing region.
By 0435 GMT, Brent crude futures were down 31 cents, or 0.4 per cent, trading at $77.74 per barrel. Meanwhile, US West Texas Intermediate (WTI) crude futures fell by 20 cents, or 0.27 per cent, to $74.18 per barrel.
Last week, Brent prices surged by over 8 per cent, marking its most significant weekly gain since January 2023. WTI prices also rose by 9.1 per cent, the highest since March 2023. This spike was driven by expectations that Israel might target Iranian oil infrastructure in response to a missile attack on Israel by Iran on October 1.
As the situation in Israel continues to evolve, some investors opted to sell their futures contracts to secure profits from the previous week’s increases. “Profit-taking appears to be the most reasonable explanation for Monday’s decline in oil prices,” noted Priyanka Sachdeva, a senior market analyst at Phillip Nova.
Despite this recent drop, the oil market remains sensitive to potential Israeli actions against Iran, with fears of a broader conflict likely supporting prices. On Sunday, Israel conducted airstrikes on Hezbollah targets in Lebanon and the Gaza Strip, coinciding with the one-year anniversary of Hamas’ attacks on Israel that ignited the ongoing conflict.
In response to these tensions, Israel’s Defence Minister stated that all options are on the table for retaliation against Iran, following a missile strike by Iran on Israeli territory, which was provoked by Israeli actions against Hezbollah and its operations in Gaza.
However, ANZ Research cautioned that the recent rise in oil prices may not significantly impact overall supply. They indicated that a direct attack on Iran’s oil facilities is unlikely to be Israel’s primary response. “Geopolitical events have had a diminished impact on oil supply in recent years, leading to a smaller risk premium in oil markets. Additionally, OPEC’s spare capacity of 7 million barrels per day provides a buffer,” the report stated.
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