Oil prices ease as markets assess geopolitical risks

Oil prices weakened on Monday, with WTI price dropping to the $86.9 per barrel level. If WTI price declines, it may encounter support near $81.6 per barrel, while resistance may be found near $88.3 per barrel.

Oil prices eased on Monday, after spiking last week on increased geopolitical risks. The crisis between Israel and Hamas has intensified, threatening to spill over to other Middle Eastern countries. Fears of a potential Iranian involvement caused oil prices to surge last week. On Monday, however, markets were cautious and oil prices dipped, as investors assessed the situation in Israel, and many adopted a wait-and-see approach. 

Supply concerns intensified last week as the US tightened its sanctions program against Russian crude exports. The US announced a new set of measures that will make it harder for Russian shipping companies to violate the G7′s oil price cap.

OPEC+ kept its output policy unchanged at its latest meeting, maintaining its recent cuts by Russia and Saudi Arabia, which have already been extended till the end of the year. 

Supply concerns have also been boosting oil prices. Russian authorities have decided to restrict diesel and gasoline exports to stabilize domestic fuel prices. Russia, however, eventually decided to relax the fuel ban, assuaging supply concerns. 

A strong US dollar and high-interest rates keep oil prices in check. The oil demand outlook has declined as the Fed has hinted at further tightening. The Fed decided to pause rate hikes at its September policy meeting, but that does not necessarily mean it has reached its rate ceiling. Even if the Fed has reached its interest rate ceiling, rates are likely to stay high for longer, driving oil demand outlook and oil prices down. 

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Written by:
Myrsini Giannouli

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