Oil Prices Continues To Drop Below $80

Monday saw oil rallies following last week’s attacks on the Houthis by the United States and the United Kingdom. Brent is now trading at $77.59 a barrel.

Additionally, West Texas Intermediate (WTI), the benchmark for the United States, was trading at the same time for $72.42 per barrel, up 0.19% from Friday’s closing of $72.28 per barrel.

According to a report from an ING commodities strategist, the oil market suffered considerable weakness last week as Brent sold off more than 7.4%, taking it back below US$80 per barrel.

Part of this weakness was motivated by hopes for an Israeli-Hamas cease-fire. Analysts argue that a ceasefire does not, for the time being, seem imminent.

A much stronger-than-expected US jobs report on Friday would also have added some pressure, calling into question whether the US Fed will start to cut rates anytime soon.

However, this morning, oil has opened stronger after further US and UK attacks on the Houthis over the weekend, which the Houthis have said they will retaliate against.

Commodities analysts said while, developments in the Red Sea are having an impact on some physical markets, on the whole, oil supply remains unaffected.

Furthermore, the oil market is largely balanced in 1Q24 and OPEC is sitting on a large amount of spare capacity, leaving the market fairly comfortable. However, this could quickly change if tensions spread to other parts of the Middle East.

Middle distillates remain relatively well supported with the ICE gasoil crack remaining around the US$30/bbl level.

Longer shipping times for middle distillates from the Middle East and Asia into Europe are leading to some tightness in Europe. Europe has become increasingly reliant on middle distillates from Asia and the Middle East since the EU ban on Russian oil and refined products.

A US military base in Syria’s Deir ez-Zor province came under drone attack from Iranian-backed groups, local sources said Monday. These Iranian-backed groups stationed on the western bank of the Euphrates River used multiple kamikaze drones in their attacks on the Al-Omar oilfield, where US forces are stationed.

The US began airstrikes on Friday against the Quds Force of Iran’s Islamic Revolutionary Guard Corps (IRGC) and Iranian-backed militias in Iraq and Syria after a suicide drone attack killed three American troops in Jordan last month.

The US also said Sunday that it conducted ‘self-defence strikes’ against missiles in areas of Yemen controlled by the Houthi group.

The Houthis have been targeting cargo ships in the Red Sea owned or operated by Israeli companies or transporting goods to and from Israel in solidarity with Gaza, which has been under an Israeli onslaught since Oct. 7.

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