Third weekly drop in oil prices due to concerns about the Middle East conflict

10 Nov 2023 , 10:37 AM

After climbing the previous session, oil prices barely moved on Friday. However, they are expected to decline for a third week as worries about supply interruptions due to the Israel-Hamas war have subsided, allowing demand concerns to resurface.

The January contract for Brent crude was unchanged at $80.01 a barrel, while the December contract for U.S. West Texas Intermediate (WTI) crude was down 7 cents to $75.67.

WTI has down 5.9% since last week, while Brent futures have dropped 5.7% this week. For both contracts, the three weeks of losses are the longest weekly losing run since a four-week slide from mid-April to early-May.

‘The likelihood of Middle Eastern supply disruptions is decreasing,’ ANZ Research stated in a note on Friday.

‘The conflict remains well contained within Gaza, despite concerns it would escalate as neighbouring Arab nations show their displeasure.’

Though there was no indication of a full cessation of hostilities, the White House announced on Thursday that Israel has agreed to suspend military operations in some areas of north Gaza for four hours each day.

The perception that the Israel-Hamas conflict is lessening supply interruptions coincides with growing concerns about demand, particularly from China, which is the world’s largest oil importer.

This week’s weak Chinese economic data heightened concerns about declining demand. Furthermore, Chinese refiners, who purchase the most crude oil from Saudi Arabia, the world’s biggest exporter, requested a reduction in Saudi Arabia’s supply for December.

However, after hitting their lowest point since July earlier this week, Citi analysts said in a note on Thursday that they expected the negative pressure to lessen and prices to rise.

‘We expect prices to consolidate, and we maintain our near-term price forecasts with support expected to come from refinery maintenance easing and a shift in the risk-reward for investors following the recent sell-off,’ stated Citi.

‘Supply risks in the Middle East remain high, and there are plenty of upside risks from current levels, including the possibility that the Organization of the Petroleum Exporting Countries and its partners would try to take action to protect prices.

For feedback and suggestions, write to us at [e-mail]