Oil falls by more than $1/bbl as Israel officials seek to avoid broader Middle East war By Reuters

Written by Leila Kearney

NEW YORK (Reuters) – Oil prices fell more than $1 a barrel on Monday after Israeli officials said they wanted to avoid dragging the Middle East into all-out war while responding to a deadly rocket attack on the Israeli-occupied Golan Heights over the weekend.

U.S. crude oil futures for September delivery fell $1.39 to $79.74 a barrel, a loss of 1.7%, by 11:17 a.m. ET (1517 GMT). U.S. crude oil futures for September delivery fell $1.40 to $75.76 a barrel, a drop of 1.8%.

Israel wants to hurt the Iran-backed Lebanese Hezbollah group, which the country holds responsible for Saturday’s attack that killed 12 children and teenagers, without sparking a regional conflict, two Israeli officials told Reuters on Monday.

“This means that a ceasefire in Gaza may not be far in the future,” said Bob Yawger, director of energy futures at Mizuho in New York.

On Sunday, Israel’s security cabinet authorized Prime Minister Benjamin Netanyahu’s government to decide on “the manner and timing” of the response to the attack on the soccer stadium.

Israel has vowed to retaliate in Lebanon against the Iran-backed Hezbollah, which has denied responsibility for the attack. Israeli aircraft struck targets in southern Lebanon on Sunday.

The tensions have raised investor concerns about the potential impact on crude output from the world’s largest oil-producing region, but production has not been affected so far.

“Despite renewed geopolitical tensions in the Middle East, the absence of any supply disruptions is limiting any positive reaction to prices,” said Giovanni Staunovo, an analyst at UBS.

“Concerns about oil demand, driven by weak Chinese economic data, are another factor that is not helping oil prices at the moment.”

Brent and West Texas Intermediate crudes lost 1.8% and 3.7% respectively last week due to weaker Chinese demand and hopes for a ceasefire agreement in Gaza.

China’s total fuel oil imports fell 11% in the first half of 2024, data released this month showed, raising concerns about the broader demand outlook in the world’s largest crude oil importer.

Prices also fell late last week on news that Nigeria’s giant Dangote oil refinery was reselling cargoes of U.S. and Nigerian crude after technical problems at the terminal.

Meanwhile, markets are watching oil-producing Venezuela after the country’s electoral body declared President Nicolas Maduro won a third term with 51% of the vote despite multiple opinion polls suggesting the opposition would win.

The United States said earlier that it would “determine” its sanctions policy toward Venezuela depending on the outcome of the election in the OPEC member state.