Oil edged lower as the US stepped up diplomatic efforts to stop the Israel-Hamas conflict from spreading and neared a deal to increase crude exports from Venezuela. Still, Israel’s expected ground offensive into the Gaza Strip is keeping markets on edge.
(Bloomberg) — Oil edged lower as the US stepped up diplomatic efforts to stop the Israel-Hamas conflict from spreading and neared a deal to increase crude exports from Venezuela. Still, Israel’s expected ground offensive into the Gaza Strip is keeping markets on edge.
US officials have rushed to speak with Middle Eastern nations — including Iran, which supports Hamas — to contain the fighting. At the same time, Venezuela is closing in on a deal that would see the US ease sanctions on its oil industry in exchange for a freer presidential election next year, potentially adding supplies to a tight market. West Texas Intermediate futures fell below $87 a barrel on Monday after surging almost $5 last week.
Still, Iran’s foreign minister has said an expansion of the war is “approaching the inevitable stage,” and the danger of a wider conflict has sparked a race to hedge against a price spike in the options market, with bullish calls trading at the biggest premium to bearish puts since April last year.
“Traders are really struggling to figure out how to trade this,” said Amrita Sen, co-founder and director of research at consultant Energy Aspects. “There’s no direct supply losses,” yet the geographical proximity to other regional powers such as Iran is “probably just too close for comfort.”
The global crude market has been transfixed by the crisis in the Middle East on concern that an escalation may jeopardize crude exports from a region that accounts for about a third of global supply, though so far flows have been largely unaffected.
US Secretary of State Antony Blinken made an unscheduled return to Israel Monday following talks with Arab officials, including in Saudi Arabia. With thousands of Israeli troops massed near Gaza, the Biden administration also has beefed up the US military presence in the region.
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