Oil Steady as Economic Gloom Erodes Mideast Supply Risks
Oil held steady as broader market weakness and concerns about a global crude glut eroded gains from rising tensions in the Middle East.
West Texas Intermediate rose near $68 a barrel, while Brent hit $71. Israel launched a military offensive in Gaza, shattering a ceasefire with Hamas, while the U.S. increased pressure on Iran. Capping oil’s gains, U.S. equities slumped and the dollar strengthened, making commodities priced in the currency less attractive.
“Crude is pricing in only a minimal geopolitical risk premium as tensions between Israel and Hamas resurface,” said Rebecca Babin, senior energy trader at CIBC Private Wealth Group. “Most traders see the premium as a selling opportunity, positioning for a year-end inventory build and rising macroeconomic risks.”
Crude remains on track for a quarterly loss on a confluence of bearish factors. An escalating global trade war threatens demand, while OPEC and its allies are set to increase production starting in April. That’s because global markets are already ripe for oversupply, according to the International Energy Agency. U.S. President Donald Trump will also speak with his Russian counterpart Vladimir Putin on Tuesday to negotiate an end to the war in Ukraine. But some market participants were quick to hedge against rising geopolitical risks. Premiums on bearish put options fell relative to bullish calls on Monday, and the day’s trading was dominated by a surge in $100-a-barrel bets.
Source: Bloomberg
