Oil prices held steady on Monday following a rocket strike in the Israeli-occupied Golan Heights. The attack raised fears of a broader conflict in the Middle East, which helped balance out concerns about weak demand and limited last week’s price losses. Brent crude futures slipped by 33 cents, or 0.41%, to $80.80 per barrel by 1214 GMT. Meanwhile, U.S. West Texas Intermediate (WTI) crude futures dropped by 29 cents, or 0.38%, to $76.87 per barrel. Last week, Brent and WTI benchmarks declined by 1.8% and 3.7%, respectively, due to weakening Chinese demand and hopes for a ceasefire in Gaza.
PVM analyst John Evans noted the cautious market reaction, stating, “A rather muted opening greets oil prices after Middle East tension is back on the menu due to a reported Hezbollah attack.” This attack on the Golan Heights has significantly impacted market sentiment.
In response to the attack, Israel’s security cabinet authorized Prime Minister Benjamin Netanyahu’s government to decide on the timing and manner of retaliation. The attack tragically resulted in the deaths of 12 teenagers and children. Israel has vowed to retaliate against Iran-backed Hezbollah in Lebanon, although Hezbollah has denied responsibility for the attack. On Sunday, Israeli jets targeted sites in southern Lebanon.
The increasing tensions have incited investor concerns about a potential wider regional conflict, which could impact crude output from the world’s largest oil-producing region. Despite these fears, there have been no disruptions to the oil supply so far. UBS analyst Giovanni Staunovo commented, “Despite renewed geopolitical tensions in the Middle East, the lack of any supply disruptions limits any positive price reaction.”
Another factor weighing on oil prices is the concern over demand, driven by weak economic data from China. Recent data showed that China’s total fuel oil imports fell by 11% in the first half of 2024, raising concerns about the demand outlook for the world’s largest crude importer.
Adding to the downward pressure on prices, the end of last week saw declines following news that Nigeria’s Dangote oil refinery is reselling cargoes of U.S. and Nigerian crude due to technical problems at the plant. This development has added to the market’s worries about supply and demand imbalances..
