Oil slipped more than 1% on Monday as concern eased about the Israel-Hamas war affecting supply from the region and as investors adopted caution ahead of this week’s U.S. Federal Reserve meeting and other indications of global economic health.
Crude had jumped 3% on Friday after Israel stepped up ground incursions into Gaza, stoking worries the conflict could expand in a region that accounts for a third of global oil output. However, that concern was fading on Monday, analysts said.
“There is a propensity for market users in all their guises to have at least some oil length going into the weekends and when the fear of conflict spread shows no validation come the early hours of Monday mornings’ openings, that fear hedge is ordinarily unwound,” said John Evans of oil broker PVM.
Brent crude futures dropped $1.39, or 1.5%, to $89.09 a barrel by 0911 GMT, while U.S. West Texas Intermediate crude was down $1.63, or 1.9%, at $83.91.
“Despite an escalation in the Hamas-Israel war, the ground invasion was widely expected,” said CMC Markets analyst Tina Teng. “The weekend playout signals no further expansion into a wider regional war, which caused a retreat in oil prices.”
On Monday, Palestinians in northern Gaza reported fierce air and artillery strikes as Israeli troops backed by tanks pressed into the enclave with a ground assault that spurred more international calls to protect civilians.
As well as the Middle East, investors are focused on the outcome of Wednesday’s Federal Reserve meeting as well as on what earnings from the likes of tech giant Apple Inc might indicate regarding the prospects for economic slowdown.
The Fed is widely expected to keep interest rates unchanged, while the central banks of Britain and Japan are also set to review their policies.
China reports its October manufacturing and services PMIs this week, with investors looking out for more signs that the economy of the world’s top crude importer is stabilising.