Oil Market Under Pressure: Global Tensions Drive Prices

Oil prices eased slightly on Monday after recording their strongest increase in more than a year last week. The focus remains on ongoing geopolitical tensions in the Middle East, which are unsettling the markets. Brent oil futures fell by 0.5% to $77.62 per barrel, while the US West Texas Intermediate crude futures decreased by 0.5% to $74.03 per barrel. Despite the recent price correction, the Brent contract rose over 8% last week, while the WTI contract increased by 9.1%. Market analyst Tina Teng suggests that profit-taking after the strong price rise triggered the current downward movement. Nevertheless, prices could continue to climb due to ongoing geopolitical uncertainty and tensions between Israel and Iran. Israel recently attacked Hezbollah targets in Lebanon and the Gaza Strip, while Iranian missiles hit Israeli territory. Despite the recent price increases, ANZ Research estimates the impact of the conflict on oil supply to be limited. A direct attack on Iranian oil facilities by Israel is considered unlikely, as it would strain international partnerships. The Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia and Kazakhstan, have considerable unused capacity that could offset any supply losses. However, possible escalation by Iran could bring new challenges. At their last meeting, OPEC and its partners decided to maintain the current production policy and gradually increase output from December to respond to weak global demand.