Investing.com — Oil prices fell on Monday as lingering doubts over whether recent OPEC+ production cut deals will curb growing supply offset potential disruptions in the Middle East amid looming geopolitical risks.
At 2:30 PM ET (19:30 GMT), the price settled 1.4% lower at $73.04 per barrel and the contract fell 1.1% to $78.03 per barrel.
The attacks on the Red Sea are reviving concerns about supplies in the Middle East
The Pentagon said this weekend that multiple US military and commercial ships were attacked in the Red Sea, while Yemen’s Houthi Group claimed to have carried out drone and missile attacks on Israeli ships in the area.
Concerns about the war between Israel and Hamas had been steadily seeping out of markets over the past month as the conflict had so far caused few disruptions to supplies from the Middle East.
But the new attacks could herald a potential spillover in the conflict, drawing the US and other Middle Eastern powers and disrupting supplies at a time when a weeklong truce between Israel and Hamas collapsed, which would lead to a resumption of the war.
“Crude oil prices near $80 per barrel appear undervalued as the market faces shortages and inventories are low. Moreover, geopolitical risks still loom, a wider conflict in the Middle East will pose a potential downside supply risk” , ANZ Research said in a note. . “If the US tightens sanctions on Iran and Russia and OPEC+’s voluntary cuts go as planned, this will seriously worsen the market balance.”
Skepticism about OPEC’s voluntary cuts continues to weigh
Remove ads
.
The crude oil market fell about 2% last week after the Organization of the Petroleum Exporting Countries and allies including Russia, a group known as OPEC+, imposed new additional cuts of just under 900 million barrels per day in the first quarter of 2024 agreed.
However, these cuts were voluntary in nature, raising questions as to whether or not producers would fully implement them as they still need the resources generated by the sale of these barrels.
“The announcement of the OPEC+ meeting failed to convince the market of a tighter oil balance in the near term,” ING analysts said in a note. “Pessimism about compliance with the new deal remains one of the biggest concerns for the market for the time being.”
(Peter Nurse, Ambar Warrick contributed to this article.)
