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Published: November 6, 2023
Updated: November 6, 2023

Oil Prices Decline Amidst Eased Supply Concerns ; No Signs of Escalation in Israel- Hamas conflict

Oil Prices Experience Weekly Loss as Geopolitical Tensions Ease

Oil prices saw a decline on Friday, marking a weekly loss due to reduced concerns about supply disruptions driven by Middle East tensions. Simultaneously, employment data has raised expectations that the US Federal Reserve may halt its interest rate hikes in the largest oil-consuming economy.

Oil Price Movements:

Brent crude futures dropped by $1.04, equivalent to a 1.2% decrease, settling at $85.81 a barrel by 12:24 p.m. EDT. On the other hand, US West Texas Intermediate crude futures fell by $1.03, a 1.3% decrease, closing at $81.42 a barrel. Both benchmarks were heading for weekly losses exceeding 5%.

Middle East Tensions:

Hezbollah leader Sayyed Hassan Nasrallah, speaking for the first time since the Israel- Hamas conflict began, warned of the potential for a broader Middle East conflict. However, he did not commit to opening another front on Israel's border with Lebanon, which has implications for regional stability.

US Job Data Impact:

US job growth in October was slower than expected, and wage inflation cooled, indicating a potential easing of labour market conditions. This data supports the view that the US Federal Reserve may not need to continue raising interest rates.

Central Banks' Stance:

The US Federal Reserve maintained its interest rates this week, and the Bank of England kept rates at a 15-year high. This has contributed to the return of some risk appetite in the markets, thus supporting oil prices.

China's Economic Indicators:

In contrast, a private sector survey revealed that while China's services sector grew slightly faster in October, sales saw the slowest growth in ten months, and employment stagnated as business confidence waned. Additionally, recent data showed an unexpected contraction in China's manufacturing activity in October.

Saudi Arabia's Supply Decision:

Saudi Arabia is anticipated to reaffirm its commitment to an extension of its voluntary oil output cut of 1 million barrels per day through December. This move aligns with analysts' expectations and has implications for global oil supply dynamics.

The decline in oil prices this week is attributed to the easing of Middle East tensions and developments in the labour market. While central banks' decisions have played a role in stabilizing oil prices, indicators from China and Saudi Arabia's supply decisions remain key factors to watch in the oil market.