Oil prices fell in Asian trade on Monday, reversing course after a sharp rally in the prior week as markets awaited any more developments in the Israel-Hamas war, as well as a string of Asian economic cues this week.
Crude prices had settled higher after volatile swings last week, amid expectations that the conflict could cause any disruptions in supply from the world’s biggest oil producing region. But this was somewhat offset by signs of cooling U.S. demand and higher production.
Brent oil futures fell 0.3% to $90.51 a barrel, while West Texas Intermediate crude futures fell 0.4% to $85.97 a barrel by 20:33 ET (00:33 GMT).
Israel-Hamas conflict continues to hold market focus
Both major contracts jumped between 6% and 8% through the prior week, as markets watched for any signs of the Israel-Hamas war sparking a broader conflict in the Middle East.
Israel’s Prime Minister Benjamin Netanyahu on Sunday vowed to “demolish Hamas,” as his troops prepared for a ground assault on the Gaza strip, in retaliation for a series of deadly strikes by the terrorist group Hamas against Israeli border towns.
But U.S. President Joe Biden said any Israeli occupation of the Gaza Strip would be a “big mistake,” although he still called the termination of Hamas a “necessary requirement.”
Any signs of the conflict spilling over into the broader Middle East region are likely to provide more support to oil prices, given that they herald disruptions in supply. Specifically, Iran’s joining in the conflict has been in close focus, given that the country is the world’s fifth-largest producer of oil.
Chinese, Japanese economic cues on tap
Markets were also awaiting more cues on economic conditions in the world’s largest oil importer, China, with third-quarter gross domestic product data due later this week. Growth is expected to have deteriorated further through the quarter, pointing to a weak outlook for fuel demand in the country.
An interest rate decision from the People’s Bank of China is also due this week, with focus remaining on any signs of more stimulus in the country.
Inflation data from Japan is on tap this week, and is expected to offer more insight into the Bank of Japan’s plans to begin tightening monetary policy.
In the U.S., more insight into crude stockpiles is awaited this week, after the country logged a sharp increase in oil inventories and production in the first week of October, Investing.com reported.
