Oil slips further amid broad market selloff

August 05, 2024 (MLN): Oil extended losses from the lowest close in seven months as a broader selloff in financial markets outweighed the impact of escalating tensions in the Middle East.

Brent crude fell towards $76 per barrel after closing at its lowest since early January on Friday.

While West Texas Intermediate crude (WTI) slipped below $73 a barrel.

A rout in global equities worsened on Monday on concerns around the economic outlook, as reported by Bloomberg.

Still, the market is bracing for a possible attack from Iran and regional militias against Israel in retaliation for assassinations of Hezbollah and Hamas officials. The US has sent defensive reinforcements to the region.

Oil has notched four weeks of declines on signals of faltering demand in the US and China, with the Asian nation rolling out plans to spur domestic consumption over the weekend.

OPEC+ supply cuts and concerns the conflict in the Middle East could impact production from the region had supported prices.

“While there are growing demand concerns, geopolitical risks continue to hang over the oil market,” Warren Patterson, head of commodities strategy at ING Groep NV in Singapore, said in a note. An escalation in the Middle East may lead to short-term volatility, but an actual disruption to crude supply is needed to see sustained price strength, he added.

US Secretary of State Antony Blinken told his G-7 counterparts on Sunday that an attack on Israel by Iran and Hezbollah could begin as early as Monday, Axios reported, citing three unidentified sources briefed on the call.

The US doesn’t know the exact timing, Blinken said, but sees the strikes starting in the next 24 to 48 hours, according to the report.

Elsewhere, Saudi Arabia raised the price of its flagship crude to Asia for the first time in three months, a tentative sign that the kingdom remains confident about demand in the region. It made significant cuts for Europe and the US.

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