Oil dropped for a third day, erasing all of the surge on Monday that followed Hamas’ attack on Israel over the weekend.
West Texas Intermediate fell below $83 a barrel after slumping Wednesday following a New York Times report that Iran may have been surprised by the assault. The country’s apparent lack of culpability may reduce the chances of additional sanctions on Iranian oil and help prevent the nation and its proxies across the Middle East from being drawn into the conflict.
President Joe Biden denounced those offering justification for the attacks by Hamas, saying it was “unconscionable” to downplay the atrocities. His administration is weighing re-freezing $6 billion of Iranian oil money, while Secretary of State Antony Blinken is headed to Israel in a show of support as the nation’s new unity government signaled a major ground offensive on Gaza.
There’s still “a latent risk of a geopolitical flare-up in oil,” said Vishnu Varathan, Asia head of economics and strategy for Mizuho Bank Ltd. in Singapore. “Reassurances of the Israel-Hamas war not impacting oil supply are highly conditional on the conflict not spilling over, and there is just simply no guarantee of this.”
Crude’s initial gain this week has been eroded by OPEC+ leader Saudi Arabia on Tuesday reiterating support for the group’s efforts to balance oil markets. Record-high US production and the possibility of a deal between the US and Venezuela have also helped ease concerns about the global supply tightness that helped fuel a rally last quarter.
The American Petroleum Institute reported a large increase in nationwide stockpiles, according to people familiar with the data. However, inventories at Cushing, Oklahoma resumed a drop toward critically low levels after a small increase last week. Official data is due later Thursday, as well as monthly oil market reports from OPEC and the International Energy Agency.
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