By Scott DiSavino
Oil prices experienced a 1% decrease in volatile trading on Thursday following reports that the U.S. and Israel are considering restarting discussions on a potential ceasefire in Gaza.
Brent futures closed 58 cents lower at $74.38 a barrel, while U.S. West Texas Intermediate crude (WTI) slipped 58 cents to $70.19.
Earlier in the day, both benchmarks saw an increase of over $1 per barrel due to concerns over the ongoing conflict in the Middle East potentially causing disruptions in oil supply, coupled with uncertainty surrounding the upcoming U.S. presidential election on Nov. 5.
Analysts at energy advisory firm Ritterbusch and Associates noted, “(The) energy complex continues to zig and zag as Middle East risk premium expands and contracts almost daily.”
Recent events, such as Iran firing missiles at Israel on Oct. 1, have led to fluctuations in oil prices. The market surged by 8% in the week ended Oct. 4 amid fears of an attack on Iran’s oil infrastructure, only to drop by 8% in the week ended Oct. 18 following reports that such an attack was not imminent.
Iran, a member of the Organization of the Petroleum Exporting Countries (OPEC), produced approximately 4 million barrels per day (bpd) of oil in 2023, according to U.S. Energy Information Administration data. The country was expected to export around 1.5 million bpd in 2024.
With the U.S. presidential election looming, President Joe Biden’s administration is advocating for peace between Israel and various groups backed by Iran, such as Hezbollah in Lebanon, Hamas in Gaza, and the Houthis in Yemen.
Market analyst Kelvin Wong of OANDA mentioned, “(Former President Donald) Trump is leading over (Vice President Kamala) Harris based on current data from betting markets and Trump has proposed making the U.S. a major oil supplier,” which could potentially impact oil prices.
Amidst these geopolitical tensions, concerns over demand persist. In Europe, business activity in the Eurozone remained in contractionary territory this month, while the UK saw a decrease in optimism among firms. In the U.S., although new applications for unemployment aid dropped unexpectedly last week, the number of individuals collecting benefits in mid-October reached its highest level in nearly three years.
In conclusion, the fluctuating oil prices due to geopolitical tensions, coupled with economic uncertainties in major regions such as Europe and the U.S., highlight the need for investors and individuals to stay informed and cautious in their financial decisions.