Oil Prices Drop After United Arab Emirates, Iran-aligned Houthi Group Agreed to Halt Military Operations

Oil prices fell on Monday after reports that the United Arab Emirates and the Iran-aligned Houthi Group have agreed to stop military operations on the Saudi-Yemeni border.

Brent crude oil, the international benchmark for the Nigerian type of crude oil, declined to $105 per barrel as of 9:49 am Nigerian time on Monday following a week consecutive drop from $123 a barrel. The U.S West Texas Intermediate (WTI) also dropped to $99.16 a barrel.

The truce between the United Arab Emirates and the Iran-aligned Houthi group that has been using drones to bomb and attack Saudi Arabia’s oil facilities eased supply concerns caused by the intermittent attacks. Crude oil investors are projecting a better than expected supply in the middle east.

“This was a threat to supply, and a ceasefire would reduce that threat to supply,” said Phil Flynn, an analyst at Price Futures Group.

However, reports that the European Union members have agreed on a fourth package of sanctions against Russia following its invasion of Ukraine continue to support oil prices and could further push prices up depending on the size of the sanctions.

According to the French president,  the new sanctions will include revoking Russia’s “most-favored nation” trade status, a decision “that could open the door to the bloc banning or imposing punitive tariffs on Russian goods and putting Russia on the same level with North Korea or Iran.”