Oil prices saw a decrease during early Monday trading, ending their five-day rally last week. Brent crude futures were down 43 cents, hitting $81.76 per barrel as of 01:35 GMT. This reflects a 0.5 percent drop. Similarly, U.S. West Texas Intermediate crude futures fell by 46 cents, or 0.6 percent. Figures settled at $76.38 per barrel.
This downturn comes after the Israeli military announced that it has “concluded” its “series of strikes” in southern Gaza. As such, concerns over potential disruptions in Middle East oil supplies were slightly alleviated. Days prior, Israeli Prime Minister Benjamin Netanyahu rejected Hamas’s ceasefire proposal.
Read: Saudi Arabia’s non-oil sector grows, PMI records 55.4 in January
Broader economic concerns
The possibility of an escalated conflict between Israel and Palestine in the region, along with fears of interruptions in Middle East oil flows, had previously driven oil prices up by approximately 6 percent in the previous week.
These developments come amid broader economic concerns, as highlighted during the Arab Fiscal Forum in Dubai on Sunday.
Kristalina Georgieva, managing director of the International Monetary Fund (IMF), pointed out that Middle Eastern economies are not performing as well as expected. Factors include oil production cuts and the ongoing Israel-Gaza conflict.
The IMF adjusted its GDP growth forecast for the Middle East and North Africa in its January economic report for the region. The estimates were down to 2.9 percent for the year. This is 0.5 percentage points lower than its predictions from October.
Potential boost in production
Amid geopolitical tensions that affect oil prices, a potential boost in production in the U.S. is providing relief. U.S. energy companies have ramped up their oil and natural gas drilling operations to levels not seen since mid-December.
Last week, domestic production climbed back to a peak of 13.3 million barrels per day.
However, a Federal Reserve official expressed disinterest in recommending a cut to interest rates, joining others in a cautious approach toward inflation. Higher interest rates can hinder economic growth and, in turn, reduce oil demand.
Meanwhile, the oil market is anticipating the release of the OPEC Monthly Oil Market Report (MOMR) on Tuesday. This will provide further insights into global oil market dynamics.
Trading activity in Asia is expected to be limited due to holidays across the region, including in China, Hong Kong, Japan, South Korea, Singapore, Taiwan, Vietnam and Malaysia. Mainland China’s financial markets are closed for the Lunar New Year holiday and will resume on February 19. Meanwhile, Hong Kong markets will reopen on February 14.
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