Oil prices saw a decline on Tuesday as concerns over potential supply disruptions due to the ongoing conflict between Israel and Hamas eased. While traders remain cautious, the situation has improved, leading to a drop in prices.
As of 11:35 CDT (1635 GMT), Brent crude was down 47 cents at $87.68 per barrel, and US West Texas Intermediate (WTI) crude fell 42 cents to $85.92 per barrel. Earlier in the day, both benchmarks had fallen by over $1.
An analyst at Price Futures Group, Phil Flynn, stated, “Today it’s more like a ping pong game of fear-on, fear-off rather than trading based on fundamentals.” This suggests that market sentiment is fluctuating based on the developments in the conflict.
On Monday, Brent and WTI had surged by more than $3.50 due to concerns that the conflict could escalate and spread beyond Gaza. However, the market has now become more cautious, leading to a slight dip in prices.
Fiona Cincotta, a senior financial markets analyst with City Index, noted, “For now, the market seems to accept that oil flows will not be directly affected, with no proof of a significant reduction in oil exports.” She further added that any evidence of Iranian involvement in the conflict could push prices higher.
Looking ahead, energy analyst Vivek Dhar from CBA predicts that Brent oil prices will stabilize between $90 and $100 per barrel in Q4 2023. However, the ongoing Palestine-Israel conflict raises the risk of Brent futures reaching $100 a barrel.
Overall, the oil market is currently experiencing a period of uncertainty, with prices reacting to geopolitical developments rather than economic factors.