Oil prices decline as markets assess the impact of the unrest in the Middle East

10 Oct 2023 , 09:30 AM

Tuesday saw a modest decline in oil prices following a previous session increase of more than 4% as markets assessed the possibility of supply disruptions due to the ongoing fighting between Israel and the Palestinian Islamist organization Hamas.

Brent crude was down 18 cents, or 0.2%, to $87.97 per barrel, while West Texas Intermediate crude in the United States was down 16 cents, or 0.2%, to $86.22 per barrel.

On Monday, both benchmarks rose by more than $3.50 in response to the war news, recovering significantly from last week’s choppy trading.

On Saturday, Hamas began the biggest military offensive against Israel in decades. On Monday, fighting lasted far into the night as Israel launched a barrage of airstrikes against Gaza in retaliation.

Even though Israel only produces a small amount of crude oil, markets were concerned that if the conflict intensified, it may harm Middle East supplies and worsen an anticipated deficit for the remainder of the year.

According to news reports, the Ashkelon oil facility and port in Israel have been closed as a result of the fighting.

The conflict may also hinder American efforts to mediate a reconciliation between Saudi Arabia and Israel and any resulting boost in output for the following year.

Despite the fact that the United States has no intelligence or proof pointing to Iran’s direct involvement in the assaults, Iran is complicit, a White House official claimed on Monday.

News reports claim that negotiations between Venezuela and the U.S. have advanced, perhaps easing Caracas’ sanctions by allowing at least one more international oil company to purchase Venezuelan crude oil under certain restrictions. This is a more encouraging sign for the supply of oil.

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