Oil prices dropped by over $1 per barrel on Monday following statements from Israeli officials who expressed a desire to prevent a full-scale conflict in the Middle East while addressing a lethal rocket attack in the Israeli-occupied Golan Heights over the weekend.
By 11:17 a.m. EDT (1517 GMT), Brent futures for September delivery had fallen $1.39 to $79.74 per barrel, marking a 1.7 per cent decrease. U.S. crude also declined by $1.40 to $75.76 per barrel, a 1.8 per cent drop.
“Crude oil prices have fallen for the third consecutive week in international markets, reaching six-week lows due to concerns about Chinese demand and ceasefire hopes in Gaza. Disappointing economic data from China has heightened demand worries from the world’s second-largest consumer. Crude oil prices declined amid hopes for a ceasefire in Gaza following the recent visit of the Israeli prime minister to the United States. However, U.S. crude oil stocks fell for the fourth consecutive week, providing some support for prices. The better-than-expected U.S. second-quarter GDP data also helped to support oil prices at lower levels. We expect crude oil prices to remain volatile in today’s session. Crude oil has support at $76.00-75.40 and resistance at $77.50-78.20 in today’s session,” said Rahul Kalantri, VP Commodities, Mehta Equities Ltd.
What’s weighing on crude oil prices?
On Monday, two Israeli officials informed Reuters that Israel aims to target the Iranian-backed Lebanese group Hezbollah, which it blames for the recent attack that killed 12 children and teenagers, without triggering a wider regional conflict.
On Sunday, Israel’s security cabinet authorized Prime Minister Benjamin Netanyahu’s government to determine the “manner and timing” of the response to the attack on a football field.
In retaliation, Israel conducted airstrikes on targets in southern Lebanon on Sunday, despite Hezbollah denying involvement in the attack.
The rising tensions have raised investor concerns about potential impacts on crude oil production from the world’s largest oil-producing region, though output has not yet been affected.
Last week, Brent and WTI crude benchmarks fell by 1.8 per cent and 3.7 per cent respectively due to weakening Chinese demand and speculation about a potential ceasefire in Gaza.
Recent data showed an 11 per cent drop in China’s fuel oil imports during the first half of 2024, heightening worries about global demand in the world’s largest crude importer.
Prices also declined towards the end of last week after reports that Nigeria’s large Dangote oil refinery began reselling U.S. and Nigerian crude following technical issues at the plant.
Markets are also closely monitoring Venezuela after the country’s electoral authority declared President Nicolas Maduro the winner of a third term with 51 per cent of the vote, despite exit polls indicating an opposition victory.
The U.S. had previously indicated it would adjust its sanctions policy towards Venezuela based on the outcome of the election in the OPEC member nation.