Oil prices dip after strong weekly gains amid oversupply concerns
Shafaq News/Oil prices fell on Monday after posting their steepest weekly rise in over ayear last week as oversupply concerns amid softer demand countered the worriesof a wider Middle East war disrupting exports in the key producing region.
Brent crudefutures fell 31 cents, or 0.4%, to $77.74 per barrel by 0435 GMT. U.S. WestTexas Intermediate crude futures slipped 20 cents, or 0.27%, to $74.18 perbarrel.
Brent roseby over 8% last week, the biggest weekly gain since January 2023, while the WTIcontract gained 9.1% week-on-week, the most since March 2023, on expectationsthat Israel could strike Iranian oil infrastructure in response to an Iranianmissile attack on Israel on Oct. 1.
However, asthe Israeli response is still developing, some investors likely sold futures tolock in their gains from the previous week's rise.
"Technicalprofit-taking seems to be the most logical explanation", said PriyankaSachdeva, senior market analyst at Phillip Nova, on Monday's softening in oilprices.
Still, oilmarkets are bound to experience tailwinds amid fears of Israel's retaliation onIran, as the potential mass-scale escalation of conflict in the Middle East hascountered mounting demand-side pressures, Sachdeva said.
Israelbombed Hezbollah targets in Lebanon and the Gaza Strip on Sunday ahead of theone-year anniversary of Hamas' Oct. 7 attacks on Israel that triggered thecurrent war between Israel and the Iranian-backed militant groups. Its defenceminister also said all options were open for retaliation against Iran.
Last week,Iran launched a missile attack on Israel in response to Israel's recent attackson Hezbollah in Lebanon and its prolonged incursion in Gaza against Hamasfollowing its Oct. 7 attack.
However, ANZResearch cautioned on Monday that despite the rally in oil prices last week,the impact of the conflict on oil supply will be relatively small.
"We seea direct attack on Iran's oil facilities as the least likely response amongIsrael's options," it said.
"Moreover,we have seen a diminished impact of geopolitical events on oil supply. This hasled to a significantly smaller geopolitical risk premium being applied to oilmarkets in recent years, and OPEC's 7 million barrels per day of spare capacityprovides a further buffer."
TheOrganization of the Petroleum Exporting Countries (OPEC) and its alliesincluding Russia and Kazakhstan, a grouping known as OPEC+, has millions ofbarrels of spare capacity since it has been cutting production in recent yearsto support prices amid weak global demand.
The producergrouping has enough spare oil capacity to compensate for a full loss of Iraniansupply if Israel knocks out that country's facilities, but it would struggle ifIran retaliates by hitting the installations of its Gulf neighbours, accordingto analysts.
At its lastmeeting on Oct. 2, OPEC+ kept its oil output policy unchanged including a planto start raising production from December.
Combinedwith the uncertain pace of the economic recovery in top crude importer China,the production hike can easily shield the market from supply disruptions andcontinues to limit the upside in oil prices, said Phillip Nova's Sachdeva.
(REUTERS)
