Oil extended losses from the lowest close in seven months as a selloff in wider financial markets countered rising tensions in the Middle East, with traders watching for a potential retaliatory strike on Israel by Iran. Brent futures slipped below $76 a barrel — erasing this year’s gains — after closing at their lowest since early January on Friday. West Texas Intermediate dropped below $72. A rout in global equities worsened on Monday on concerns around the economic outlook. Still, the market is bracing for a possible attack from Iran and regional militias against Israel in retaliation for assassinations of Hezbollah and Hamas officials. The US has sent defensive reinforcements to the region.
Oil has notched four weeks of declines on signals of faltering demand in the US and China, with the Asian nation rolling out plans to spur domestic consumption over the weekend. OPEC+ supply cuts and concerns the conflict in the Middle East could impact production from the region had supported prices. “While there are growing demand concerns, geopolitical risks continue to hang over the oil market,” Warren Patterson, head of commodities strategy at ING Groep NV in Singapore, said in a note. He added that an escalation in the Middle East may lead to short-term volatility, but a disruption to crude supply is needed to see sustained price strength. US Secretary of State Antony Blinken told his G-7 counterparts on Sunday that an attack on Israel by Iran and Hezbollah could begin as early as Monday, Axios reported, citing three unidentified sources briefed on the call. The US doesn’t know the exact timing, Blinken said but sees the strikes starting in the next 24 to 48 hours, according to the report.
Saudi Arabia raised the price of its flagship crude to Asia for the first time in three months, a tentative sign that the kingdom remains confident about demand in the region. It made significant cuts for Europe and the US.
Libya’s internationally recognized government alleged “political blackmail” as production began to be cut at the OPEC nation’s largest oil field. Production at Sharara has dropped by at least 50,000 barrels a day to 210,000 since employees received orders to trim the southern field’s output on Saturday night, according to people familiar with the matter. They asked not to be identified as they aren’t authorized to speak to the media. The North African nation is split between dueling administrations in the capital in the west, Tripoli, and a rival in the east. It wasn’t immediately clear what prompted the decision or whether output would be further curtailed. NN: The great oil giveaway. Make sure you get some.