Oil Prices Dip as Middle East Tensions Ease

In early Asian trading on Monday, oil prices saw a decline following Israel’s announcement that it had wrapped up its military operations in southern Gaza. This development has somewhat alleviated the apprehensions regarding supply disruptions from the Middle East, leading to a decrease in oil prices. Specifically, Brent crude futures dropped by 43 cents to $81.76 a barrel, showing a 0.5 percent decrease. Similarly, U.S. West Texas Intermediate crude futures fell by 46 cents, landing at $76.38 a barrel, which represents a 0.6 percent reduction.

The fear of an escalated conflict between Israel and Palestine and the potential for interruptions in the Middle East’s oil supply had previously driven a roughly 6 percent increase in oil prices last week. The situation seemed to pivot when the Israeli military confirmed the completion of its strikes in Gaza, following Prime Minister Benjamin Netanyahu’s rejection of a ceasefire proposal from Hamas. Although tensions in the Middle East continue to stir supply concerns, recent news from the United States has offered some relief.

In the U.S., energy firms have ramped up their oil and natural gas rigs to the highest level since mid-December, hinting at a possible rise in output. Domestic production has also reached a record 13.3 million barrels per day. On the demand side, uncertainties linger as a Federal Reserve official expressed disinterest in recommending an interest rate cut, contributing to the ongoing efforts to control inflation. High interest rates typically dampen economic growth and, by extension, oil demand.

Trading activity in Asia is expected to be subdued due to the Lunar New Year holiday, with financial markets across China, Hong Kong, Japan, South Korea, Singapore, Taiwan, Vietnam, and Malaysia closed for celebrations. Mainland China’s markets are set to reopen on February 19, while Hong Kong will resume trading on February 14.