Oil down 2%, reversing rebound, as Israel pauses on Gaza ground assault
Investing.com - Crude prices fell 2% Thursday, reversing the previous day’s gain, on signs that Israel was acceding to international calls to hold back from a ground invasion of Gaza, as world powers worked to limit casualties and also negotiate the release of some 200 Israeli hostages held by Hamas.
New York-traded West Texas Intermediate, or WTI, crude for December delivery, settled at $83.21 per barrel, down $2.18 or 2.5% on the day. The US crude benchmark rose 2% on Wednesday after a 6% drop in three prior sessions.
UK-origin Brent crude for December delivery settled at $87.93, down $2.20, or 2.4%. The global crude benchmark rose 2.3% in the previous session after a 5% plunge over three prior sessions.
Hard to decide appropriate risk premium for oil from Mideast conflict
“I’ve said this before and I’m reiterating: It’s really hard to assign an appropriate war risk premium to crude now because the Middle East oil traffic hasn’t really been impacted by this conflict,” said John Kilduff, partner at New York energy hedge fund Again Capital.
Technical charts for WTI indicated further downside, possibly below $80 per barrel, said Sunil Kumar Dixit, chief technical strategist at SKCharting.com.
“The current price action remains bearish for US crude as long as $84.50 is active resistance,” said Dixit.
“On the downside, we can see a pull back towards $82.70 and $82. Major support is seen at $81. A day close below $81 can open the door to $77.50.”
Thursday’s slump in oil came despite US gross domestic product, or GDP, growth beating forecasts with a 4.9% annual for the third quarter, according to data that boosted the notion of a ‘soft landing’ Idea for the economy.
Most Wall Street economists had warned at one time or another this year about the potential for a recession as the Federal Reserve hiked rates aggressively to counter inflation.
While there was still a war premium attached to the possibility of contagion from the latest conflict in the Middle East, market concerns about specific consequences for the oil trade and the global economy were easing, officials said.
“Of course, there could be more meaningful consequences but I think it’s pretty immature especially [to discuss] about those,” US Treasury Secretary Janet Yellen said in comments carried by Bloomberg Television. “I think our focus should be keeping this contained and not spreading.”
The war premium on oil has been declining since a Wall Street Journal report on Wednesday that Israel had agreed to a US request to delay its expected ground invasion of Gaza so the Pentagon can place air defenses in the region to protect US troops, according to U.S. officials and people familiar with the Israeli planning.
The Pentagon is scrambling to deploy nearly a dozen air-defense systems to the region, including for U.S. troops serving in Iraq, Syria, Kuwait, Jordan, Saudi Arabia and the United Arab Emirates, to protect them from missiles and rockets. U.S. officials have so far persuaded the Israelis to hold off until those pieces can be placed, as early as later this week.
Israel is also taking into account in its planning the effort to supply humanitarian aid to civilians inside Gaza, as well as diplomatic efforts to free more of the hostages held by Hamas, The Journal reported.
(Peter Nurse and Ambar Warrick contributed to this article)
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