Oil prices fell on Monday as concerns about a potential U.S. recession, the world’s largest oil consumer, overshadowed fears that rising tensions in the Middle East could disrupt supply from the top-producing region.
Brent crude futures edged down by 4 cents, or 0.1%, to $76.77 per barrel by 0035 GMT, while U.S. West Texas Intermediate (WTI) crude futures dropped 13 cents, or 0.2%, to $73.39 per barrel.
Prices were initially supported by ongoing conflict in Gaza, where an Israeli airstrike on Sunday hit two schools, killing at least 30 people, according to Palestinian officials. The airstrike occurred following unsuccessful talks in Cairo a day earlier.
Israel and the United States are preparing for a significant escalation in the region after Iran, along with its allies Hamas and Hezbollah, vowed retaliation for the recent killings of Hamas leader Ismail Haniyeh and Fuad Shukr, a key military commander from the Lebanese group Hezbollah.
“If this conflict intensifies, crude exports could be impacted,” analysts at ANZ noted.
Despite concerns over Middle East tensions, Brent crude dropped more than 3% on Friday, settling at its lowest level since January. WTI also fell over 3%, hitting its lowest point since June. Both benchmarks have experienced four consecutive weeks of losses, marking their longest losing streaks since November.
The decline in oil prices is driven by fears of a U.S. recession, exacerbated by OPEC+ sticking to its plan to phase out voluntary production cuts from October. Market expectations had leaned toward a delay in this phase-out, according to ANZ analysts.
A Reuters survey on Friday revealed that OPEC oil output increased in July despite the group’s production cuts.
In the United States, the number of active oil rigs remained steady at 482 last week, according to a weekly report from Baker Hughes.
Weak economic data worldwide has further pressured oil prices, raising concerns that a sluggish global economic recovery will curb fuel demand. Recent data showed that the U.S. added fewer jobs than expected last month, while manufacturing activity in the U.S., China, and Europe struggled with weak demand.
A decline in diesel consumption in China, the world’s largest contributor to oil demand growth, is also weighing on global oil prices.
Source: Reuters
