OIL PRICES EASE AS AID CONVOYS ARRIVE IN EMBATTLED GAZA STRIP

Mon 23 October 2023:

Oil prices slid by more than $1 on Monday as diplomatic efforts grew over the weekend to contain the conflict between Israel and Hamas amid worries of a wider confrontation in the oil-rich region.

Brent crude futures fell by 67 cents to $91.49 a barrel, as of 02:03 GMT, having lost $1.02 to $91.14 a barrel earlier in the session, according to the Reuters news agency.

US West Texas Intermediate crude futures lost 72 cents to trade at $87.36 a barrel, after sliding $1.72 to $87.03 a barrel earlier on Monday, the report added.

Aid convoys started to arrive in the Gaza Strip from Egypt over the weekend but Palestinian officials and humanitarian groups say the delivery was still not sufficient to support the more than 2 million people in the territory living under Israeli siege.

How would an escalation of the war affect energy markets?

The Middle East’s oil and gas exports could still emerge as collateral damage if the ongoing conflict engulfs the region. Market observers expect that the US may soon toughen its sanctions on exports of oil from Iran, a major player in the commodity, due to Tehran’s close links to Hamas and Hezbollah.

Robert Ryan, the chief strategist at BCA Research, said there was a one in four chance that Iranian oil output could fall by a 1m barrels a day as a result of tougher US sanctions. He assigned the same odds to a slump in Russian oil output for the same reasons. This could lead to oil prices of $140 a barrel next year, according to Ryan. However, the impact of these sanctions could be eased if Saudi Arabia – which is restricting its oil output – were to increase its exports to help steady the market.

Quilliam said: “There’s no shortage of oil supply, it’s about getting that oil supply to the market. The real concern, the material concern, is the security of the Strait of Hormuz.”

The Strait of Hormuz in the Gulf is responsible for the transit of more than 20% of the oil consumed globally and a third of the world’s seaborne gas shipments, making it a vital energy artery for the global markets. If Iran sought to block the route this would have major implications for Europe’s supplies of gas from Qatar, the world’s top exporter of liquefied natural gas (LNG) and a longstanding backer of radical Islamist groups including Hamas. About 16% of Qatar’s exports were sent to the EU last year, making the country Europe’s second-largest source of LNG after the US. These supplies are considered crucial after the end of pipeline gas imports from Russia last year.

“It is unlikely that [the strait] would close but [military] activities in this area would be enough to push the price of oil very high for a short time at least,” Quilliam said. “It’s a well-rehearsed conversation and well-rehearsed eventuality for the leaders of many western nations.”

SOURCE: INDEPENDENT PRESS AND NEWS AGENCIES

______________________________________________________________

FOLLOW INDEPENDENT PRESS:

WhatsApp CHANNEL
https://whatsapp.com/channel/0029VaAtNxX8fewmiFmN7N22