Oil prices, which surged more than 4% on Monday due to escalating conflict between Israel and Hamas, have paused as traders seek a clearer picture of the impact on Middle East oil supplies.
By Tuesday noon in Asia, both U.S. West Texas Intermediate (WTI) crude and Brent crude were trading in the negative, with WTI down 36 cents to $86.02 per barrel, and Brent down 34 cents to $87.81.
Analysts believe the market is taking a cautious approach, waiting for credible estimates of how the conflict might affect oil production, trade, or shipments in the Middle East. While there are concerns about potential supply disruptions, especially if the conflict escalates, there’s a need for more concrete information.
John Kilduff, a partner at New York energy hedge fund Again Capital, stated that while the current conflict is significant, it’s important not to overestimate its impact on oil prices, especially considering the existing supply constraints imposed by OPEC+.
Saudi Arabia’s Energy Minister, Abdulaziz bin Salman, indicated that OPEC+ production cuts would continue, providing support to oil markets. However, there was no word on Iranian supplies, which have been a source of uncertainty for the market.
The recent surge in oil prices follows a period of volatility driven by macroeconomic factors, including surging U.S. Treasury yields and a strengthening dollar, as well as fluctuations in gasoline consumption.