Oil Drops More Than 1% As Mideast Supply Fears Abate
Monday saw a more than 1% decline in oil prices as investors exercised prudence ahead of this week's US Federal Reserve meeting and other signs of the health of the global economy, and as worries about how the Israel-Hamas conflict would affect regional supply decreased.
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Friday saw a 3% increase in crude prices as Israel increased its ground incursions into Gaza, raising concerns that the conflict may spread to an area that produces one-third of the world's energy.
Nevertheless, observers noted that by Monday, this worry was subsiding.
As early as Monday morning openings, when the fear of conflict spread shows no validity, "there is a propensity for market users in all their guises to have at least some oil length going into the weekends and that fear hedge is ordinarily unwound," according to John Evans of oil broker PVM.
By 0911 GMT, US West Texas Intermediate crude was down $1.63, or 1.9%, at $83.91, while Brent crude futures fell $1.39, or 1.5%, to $89.09 a barrel.
As Israeli forces supported by tanks pushed into the enclave with a ground assault on Monday, Palestinians in northern Gaza reported heavy artillery and airstrikes, prompting further international demands to protect civilians.
Investors are paying close attention to the Middle East in addition to the results of the Federal Reserve meeting on Wednesday and the potential for an economic slowdown hinted at by the earnings of companies like tech behemoth Apple Inc.
Interest rate stability from the Fed is widely anticipated, and policy reviews by the central banks of Britain and Japan are also planned. This week, China releases its manufacturing and services PMIs for October. Investors are watching for additional indications that the world's largest oil importer's economy is beginning to stabilize.
