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HomeLatestOil Prices Drop Nearly 2% as Middle East Tensions Ease
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Oil Prices Drop Nearly 2% as Middle East Tensions Ease

Oil prices experienced a notable decline on Monday, with Brent crude slipping below $90 per barrel, as tensions in the Middle East eased following Israel’s withdrawal of additional soldiers from southern Gaza and its commitment to fresh talks on a potential ceasefire in the ongoing six-month conflict.

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Brent crude futures saw a decrease of $1.70, or 1.9%, reaching $89.47 per barrel by 0053 GMT.

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Similarly, U.S. West Texas Intermediate crude dropped $1.62, or 1.9%, settling at $85.29 per barrel.

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According to IG market analyst Tony Sycamore, the catalyst for this decline appears to be Israel’s decision to withdraw most troops from the Southern Gaza strip, likely in response to mounting international pressure and as a measure to deescalate tensions after the recent killing of senior Iranian commanders in Syria.

In efforts to further ease tensions, Israel and Hamas dispatched teams to Egypt for fresh discussions on a potential ceasefire, providing relief to the Middle East region. These developments come after concerns over potential supply disruptions drove oil prices up by more than 4% last week.

Israeli Defence Minister Yoav Gallant stated on Sunday that Israel is prepared to address any scenario that may arise with Iran, following Tehran’s threat of retaliation for the killing of Iranian generals on April 1.

Meanwhile, Saudi Arabia, the world’s leading oil exporter, increased official selling prices for all crude grades to Asia in May, aligning with expectations, amid tightened supply of heavy oil.

Additionally, an unfortunate incident occurred on Saturday as a fire broke out on an offshore platform operated by Mexico’s national oil company Pemex, resulting in the loss of at least one contractor’s life. This incident follows Pemex’s request to its trading unit to cancel up to 436,000 barrels per day of crude exports in April.

Looking ahead, Goldman Sachs analysts anticipate Brent crude to remain below $100 per barrel under their base case scenario, assuming steady demand, no further geopolitical disruptions to oil supply, and an increase in production by OPEC+ in the third quarter.

In the United States, oil rigs increased by two to 508 last week, while gas rigs declined by two to 110, marking the lowest level since January 2022, according to Baker Hughes’ report on Friday.

The U.S. employment report released on Friday exceeded expectations, indicating a strong end to the first quarter for the economy and potentially postponing anticipated interest rate cuts by the Federal Reserve this year.

Auckland-based independent analyst Tina Teng suggested that the Fed may delay rate cuts given the robust U.S. economic data and the tight labor market.

Investors will closely monitor consumer price index data from the U.S. and China later this week for further insights into the timing of possible Fed rate adjustments and to assess the economic well-being of the top two oil consumers worldwide.

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