Oil futures traded lower on Monday, with prices pulling back after rallying late last week, as investors monitored the Israel-Hamas war amid fears the conflict could escalate, threatening supplies.
Price action
-
West Texas Intermediate crude for November delivery
CL00,
-0.65% CL.1,
-0.65% CLX23,
-0.65%
was down 54 cents, or 0.6%, at $87.15 a barrel on the New York Mercantile Exchange. A sharp rise on Friday contributed to a weekly gain of 5.9%. -
December Brent crude
BRN00,
-0.96% BRNZ23,
-0.96% ,
the global benchmark, was off 31 cents, or 0.3%, at $90.58 a barrel on ICE Futures Europe after tacking on 7.5% last week. -
November gasoline
RBX23,
+0.16%
added 0.2% to $2.2694 a gallon, while November heating oil
HOX23,
-1.16%
shed 0.3% to $3.2026 a gallon. -
Natural gas for November delivery
NGX23,
-4.91%
traded at $3.083 per million British thermal units, down 4.7%. Prices extended losses after losing 3.1% last week.
Market drivers
Oil rose sharply on Friday, with traders appearing reluctant to hold short positions ahead of the weekend as Israel prepared for an expected ground incursion into Gaza. Fears the Israel-Hamas war could spill over, perhaps involving Iran and threatening supplies from the Mideast saw traders rebuild a risk premium after an initial spike last Monday was mostly erased in subsequent sessions.
See: Oil prices in spotlight as Iran warns of escalation of Israel-Hamas war
“The sudden price increase felt on Friday came as traders pondered on the developments in Israel and started to price in the potential disruption to the global oil supply that may emanate from the conflict,” Ricardo Evangelista, senior analyst at ActivTrades, said in market commentary.
“The big question mark surrounds a possible spillover of the confrontation, which could affect major oil producers in the region, and how such a scenario could affect the global supply of crude,” he said. “Against this background, uncertainty will remain high, in a dynamic likely to continue to support the price of the barrel.”
The bounce last week, however, didn’t see crude challenge the 2023 highs set in late September.
“Any de-escalation in Gaza and a cease-fire will wipe out the political premium in oil prices,” Anas Alhajji, an independent energy expert and managing partner at Energy Outlook Advisors, said on X late Sunday, estimated the premium at around $4 to $5 a barrel.
Meanwhile, U.S. production has climbed to a record high, with output at 13.2 million barrels a day for the week ended Oct. 6, according to the Energy Information Administration. That’s the highest weekly figure based on EIA data going back to 1983.
“Aside from the influence of geopolitics, however, oil market fundamentals were mixed as U.S production surged to a new record high (bearish), but consumer demand rebounded as well and economic data continued to indicate a resilient labor market, both of which support the case for higher prices,” analysts at Sevens Report Research wrote in a Monday note.
“Looking ahead, as long as the war between Israel and Hamas continues, there will be a geopolitical fear bid in the market as oil infrastructure in the region will face an elevated threat of being targeted,” they said.
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