Oil Prices Dip as Diplomatic Efforts Intensify in the Middle East

Oil prices experienced a decline on Monday as investors remained focused on the unfolding situation in the Middle East, where diplomatic efforts are being heightened to contain the ongoing conflict between Israel and Hamas.

Brent crude oil, against which Nigerian oil is priced, fell by 24 cents or  0.26% to settle at $91.92 a barrel while U.S. West Texas Intermediate crude futures were down by 36 cents, or 0.41% to $87.72 a barrel.

The recent uptick in oil prices has been primarily driven by concerns over potential supply disruptions in the event that the Israel-Hamas conflict escalates into a broader crisis in the Middle East, a region that serves as the world’s largest oil-supplying hub.

Tamas Varga, an analyst at PVM, pointed out that “escalating wrath in the region will strengthen economic headwinds, potentially raising oil prices, pushing global inflation higher, possibly leading to monetary tightening, and hampering global oil demand growth.”

While Israel continued its bombardment of Gaza on Monday and launched airstrikes in southern Lebanon overnight, there has been some relief in the oil market due to Israel’s decision to hold off on a planned ground incursion in northern Gaza.

U.S. President Joe Biden has engaged with various world leaders, including those of Canada, France, Britain, Germany, and Italy, to address the situation.

It’s worth noting that the risk of reduced oil supply due to Middle East tensions was somewhat alleviated by the U.S. decision last week to suspend sanctions on OPEC member Venezuela, following a government deal with the opposition.

Norway’s crude production decreased to 1.64 million barrels per day in September, falling from 1.79 million bpd in August and falling short of the projected 1.73 million bpd.