Oil prices dipped during trading on Monday, as market participants scaled back risk premiums following attacks on Israel late on Saturday.
Brent crude futures for June delivery fell 23 cents, or 0.2 percent, to $90.22 per barrel. West Texas Intermediate (WTI) crude futures for May delivery were down 29 cents, or 0.3 percent, at $85.37 per barrel by 0430 GMT.
Read more: Oil prices surge amid escalating Middle East tensions, economic data in focus
The attacks raised concerns about a broader regional conflict affecting oil traffic through the Middle East. However, Warren Patterson, head of commodities strategy at ING, noted that the limited damage and lack of loss of life mean “Israel’s response will be more measured.”
Still, significant uncertainty remains about how Israel will respond. ING said supply risks include more strictly enforced oil sanctions on Iran, a major OPEC producer. Israel’s response could also target Iran’s energy infrastructure.
However, analysts said the impact on oil supply has been limited so far. The U.S. could release more crude from its strategic reserves if there were significant supply losses. OPEC also has over 5 million barrels per day of spare production capacity that it could bring online if prices spiked.
Citi Research analysts said prolonged tensions have largely priced oil at $85-90 per barrel. With the market in broad balance in Q1, de-escalation could push prices back down to the high $70s or low $80s per barrel range.
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