Oil prices slip

22 Apr 2024 , 11:21 AM

Oil prices slumped at the start of trading on Monday. Israel and Iran have downplayed the likelihood of a Middle East escalation.

Brent futures dropped 54 cents, or 0.6%, to $86.75 per barrel.

Monday is the expiry day for U.S. West Texas Intermediate (WTI) oil contract for May. It dropped 12 cents to $83.02 per barrel. At $81.75 per barrel, the more active June contract fell 47 cents, or 0.6%.

The latest central banker to suggest a lengthier timetable for interest rate reductions was Chicago Federal Reserve President Austan Goolsbee, who stated on Friday that inflationary pressures had “stalled”.

According to data from the Energy Information Administration last week, U.S. oil stockpiles increased by 2.7 million barrels. The rise was almost twice what analysts had predicted—a rise of 1.4 million barrels.

Due to Iran’s denial that it intended to retaliate over rumours of an alleged Israeli airstrike on its territory, both oil benchmarks saw their largest weekly loss since February last week. The announcement caused prices to decline after they had previously spiked above $3 per barrel.

The U.S. House of Representatives approved a package of aid for Israel and Ukraine on Saturday, which includes provisions allowing the federal government to increase sanctions against Iran and its oil output. However, as the measures’ effects would depend on how they were understood and put into effect if they were passed, the news was dismissed by the markets.

Tuesday is when the Senate will start debating the bill.

Based on data from Reuters, Iran stands as the third largest producer within the Organisation of the Petroleum Exporting Countries (OPEC). Due to demand from China and networks outside the U.S. financial system, its oil shipments have surged despite a variety of current U.S. sanctions.

One member of a security unit that comprises organisations supported by Iran was murdered in an explosion at an Iraqi military camp on Saturday. The army declared it was conducting an investigation, but the force commander claimed it was an attack.

Separately, Hezbollah, a Lebanese militia supported by Iran, claimed on Sunday to have shot down an Israeli drone that was engaged in fighting in southern Lebanon.

In tandem with the Gaza war, Israeli soldiers and Hezbollah, an armed group in Lebanon, have been exchanging gunfire for more than six months, raising fears of a further escalation.

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