In response to support from Middle East turmoil, oil prices fell more than 1% on Monday as investors exercised caution ahead of this week’s Chinese manufacturing data and a U.S. Federal Reserve policy meeting.
By 0350 GMT, U.S. West Texas Intermediate crude was down 1.2%, or $1.34, at $84.20 a barrel, while Brent crude futures had lost 1.6%, or $1.11, to $89.37 a barrel.
“The ground invasion was widely expected, despite an escalation in the Hamas-Israel war,” Tina Teng, an analyst with CMC Markets, stated.
“The weekend playout signals no further expansion into a wider regional war, which caused a retreat in oil prices.”
Due to Israel’s increased ground incursions into Gaza, which heightened concerns that the war may spread in an area that produces one-third of the world’s oil, both Brent and WTI closed Friday’s trading session up 3%.
Investors are keeping an eye out for any indications of an economic slowdown that would impact gasoline consumption in the world’s largest oil consumer. These indicators include the results of Wednesday’s U.S. Fed meeting, U.S. employment data, and Apple Inc.’s earnings.
It is largely anticipated that the Federal Reserve would maintain current interest rates, and the central banks of Japan and Britain will also likely examine their policies.
This week, China will release its manufacturing and services PMIs for October.
For the first time in three weeks, Brent and WTI declined last week as volatility and market jitters stem from developments in the Middle East.
But the weekend demonstrated that there is still just violent war between Israel and Gaza, according to Vandana Hari, founder of oil market monitoring company Vanda Insights. “Under that context, crude appears overpriced. I anticipate that it will keep falling.
As Israeli forces supported by tanks pushed into the enclave with a ground assault on Monday, Palestinians in northern Gaza reported heavy artillery and airstrikes, prompting further international demands to protect civilians.