By Adedapo Adesanya
The oil market slipped more than 3 per cent on Monday as fears eased that the Israel-Hamas war would disrupt supply from the region and as investors grew cautious ahead of this week’s US Federal Reserve meeting.
Brent crude futures lost 3.35 per cent or $3.03 to trade at $87.45 a barrel, and the US West Texas Intermediate (WTI) crude futures shed 3.78 per cent or $3.23 to close at $82.31 per barrel.
The main feature for the market for the last three weeks has been the reaction to events between Israel and Hamas.
Crude oil jumped 3 per cent on Friday after Israel stepped up ground incursions into Gaza, stoking worries the conflict could expand in a region that accounts for a third of global oil output.
However, that concern was fading on Monday, analysts said.
Israeli troops and tanks attacked Gaza’s main northern city from the east and west on Monday, three days after it began ground operations in the Palestinian enclave.
Investors are also focused on the outcome of Wednesday’s US Federal Reserve meeting.
The US central bank is widely expected to keep interest rates unchanged, while the central banks of Britain and Japan are also set to review their policies this week.
Higher inflation is seen as one of the main risks by central bankers, as it could extend the tightening campaign of central banks, keeping interest rates higher for longer.
Inflation in Germany eased noticeably in October, falling to its lowest level since August 2021, pointing to a substantial cooling in headline inflation in the Euro zone.
Euro zone inflation is expected to ease to 3.2 per cent in October from 4.3 per cent in September.
On Monday, the World Bank said it expected global oil prices to average $90 a barrel in the fourth quarter and $81 in 2023 as slowing growth eases demand, but warned that an escalation of the Middle East conflict could spike prices significantly higher.
The global lender, however, noted that prices could soar to a record high of more than $150 a barrel if the war between Israel and Hamas leads to a repeat of the full-scale conflict in the Middle East witnessed in 1973.
It also sketched out three alternative paths for oil prices ranging from small to medium to large disruptions
that would see supply drop roughly from around 500,000 barrels per day to as high as 8 million barrels per day.
Investors are looking out for more signs that the economy of the world’s top crude importer, China, is stabilising.