Oil prices fell more than $1 on Monday as diplomatic efforts to settle the crisis between Israel and the Palestinian group Hamas continued over the weekend, despite the fact that Gaza continued to be bombarded.
Brent crude futures were down 79 cents to $91.37 a barrel as of 0410 GMT, after falling $1.02 to $91.14 earlier in the session. According to Reuters, US West Texas Intermediate crude futures were down 91 cents at $87.17 a barrel after falling $1.72 to $87.03 a barrel earlier in the day.
The contracts had risen more than 1% last week for a second consecutive weekly jump on fear of potential supply disruption if the Israel-Hamas war grows into a wider confrontation in the Middle East, the world’s biggest oil-supplying region.
Aid convoys started to arrive in the Gaza Strip from Egypt over the weekend, as Arab leaders and foreign ministers gathered for a summit in Cairo which was unable to yield a joint statement.
“There is some relief in the oil market that Israel is holding off on a planned ground incursion of northern Gaza to negotiate a release of hostages, which opens up a window for diplomacy,” said Vandana Hari, founder of oil market analysis provider Vanda Insights.
“A ground siege is seen as a potential trigger for widening the Israel-Hamas conflict into the Middle East region, the factor behind crude’s risk premium over the past fortnight,” Hari said.
Analysts at ANZ Research echoed the sentiment, adding in a client note this provided hope that the Israel-Hamas war would not spread across the Middle East and disrupt supplies.
But, in the latest developments, Israel bombarded Gaza and its aircraft struck Lebanon. Asian shares drifted lower on Monday.
To ease oil supply pressure – already tight due to output cuts by the Organization of the Petroleum Exporting Countries (OPEC) and affiliates including Russia – the US suspended sanctions on OPEC member Venezuela after a Venezuelan government deal with the opposition.
US President Joe Biden, who visited Israel last week, had calls on Sunday with the leaders of Canada, France, Britain, Germany and Italy, after speaking with Israeli Prime Minister Benjamin Netanyahu and Pope Francis.
Leaders of France and the Netherlands will visit Israel this week in search of a solution for the conflict which ignited on Oct. 7 after a Hamas attack.