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Oil prices slide even amid ongoing Middle East tensions
On Monday, oil prices saw a decline as the minimal disruption of crude production due to Middle Eastern conflicts led investors to secure profits following a 2% rise in oil benchmarks the previous week. By 1051 GMT, Brent crude futures had fallen by 49 cents to $77.80 per barrel, while U.S. West Texas Intermediate crude dropped 51 cents to $72.17 per barrel.
Tanker operators chose to avoid the Red Sea, and several tankers diverted their routes this past Friday, subsequent to airstrikes by the United States and the United Kingdom on Houthi targets in Yemen, a retaliation to the Iran-aligned faction’s assault on maritime lanes linked to Israel’s combat with Hamas in Gaza. This situation has stalled the passage of a minimum of four liquefied natural gas vessels in that vicinity.
Tamas Varga from the oil brokerage PVM observed, “The recognition that the oil supply hasn’t suffered significant disruption has prompted investors from last week to withdraw for profits, a downturn that’s been slightly amplified by the currency’s strength.”
Following additional overnight airstrikes by the U.S., the Houthi group vowed a “vigorous and potent response” on Sunday. The U.S. later reported intercepting a missile aimed at one of its naval vessels originating from Yemen.
Goldman Sachs analysts commented in a report, “With the Middle East conflict not currently impacting oil output, the geopolitical risk premium incorporated into oil prices seems conservative, reflecting the implied volatility seen in options markets.”
Citi analysts have indicated that while there haven’t been direct losses in oil supplies, the ripple effect of shipping disruptions is subtly constricting the market. This results from ships holding approximately 35 million barrels of oil at sea due to the necessity of longer detours to circumvent risks in the Red Sea.
Meanwhile in Libya, demonstrators rallying against alleged government corruption threatened to close two additional oil and gas sites, following their recent shutdown of the Sharara oilfield, which normally produces 300,000 barrels of oil each day, on January 7.