Brent falls as oil supply concerns seem to ease

The front-month ICE Brent contract has lost $2.20/bbl on the day, to trade at $90.06/bbl at 09.00 GMT. PHOTO: Silhouette of oil pumps. Getty Images

Upward pressure:

Oil investors are still concerned about a potential oil supply outage due to the intensifying Israel-Hamas conflict. Analysts worry that the tension in the Middle East can grow out of the borders of Israel and Palestine and cause disruption in surrounding oil-producing regions.

Geopolitical angst will “likely keep the [oil] market volatility elevated in the coming weeks,” said OANDA’s senior market analyst Ed Moya.

Moreover, speculations about an Israeli ground assault in the Gaza Strip have kept oil analysts and investors teetering. These tensions are adding high risk to global oil supply at a time when global inventories are significantly low due to voluntary production cuts pledged by OPEC+ top oil producers.

Israel continued its bombing of the Gaza Strip yesterday after air strikes over southern Lebanon, Reuters reported.

“The oil market is worried about the timing and the fall-out of Israel’s expected ground offensive into Gaza in response to the Hamas terror attack,” said Price Futures Group’s senior market analyst Phil Flynn.

Downward pressure:

Geopolitical tensions have led to “divergent moments” in the oil market, commented SPI Asset Management’s managing partner Stephen Innes.

Despite speculations about a tight supply scenario in the oil market in 2024 amid Israel-Hamas war, no physical oil supply disruption has taken place in the Middle East so far.

This has limited Brent's move towards $95/bbl and taken “some of the heat out of the [oil] rally,” added Innes.

“Oil bulls are living life vicariously on the geopolitical risk premium,” he further added.

By Aparupa Mazumder

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