Oil Prices Retreat 2% Amid Israel’s Pause on Gaza Ground Assault

by Jennifer

Crude oil prices experienced a 2% decline on Thursday, reversing the gains from the previous day. This shift in the market was driven by indications that Israel was heeding international calls to refrain from launching a ground invasion of Gaza. World powers are actively working to minimize casualties and negotiate the release of approximately 200 Israeli hostages held by Hamas.

The New York-traded West Texas Intermediate (WTI) crude for December delivery settled at $83.21 per barrel, marking a $2.18 drop or a 2.5% decrease for the day. This comes after a 2% increase on Wednesday, which followed a 6% decline over the course of the three previous sessions.


Brent crude of UK origin for December delivery settled at $87.93, reflecting a $2.20 or 2.4% decrease. The global crude benchmark had risen by 2.3% in the preceding session following a 5% drop over the previous three sessions.


Assessing the appropriate risk premium for oil due to the Middle East conflict, John Kilduff, a partner at the New York energy hedge fund Again Capital, remarked, “It’s really hard to assign an appropriate war risk premium to crude now because the Middle East oil traffic hasn’t really been impacted by this conflict.”

Technical charts for WTI suggest the potential for further declines, possibly falling below $80 per barrel, according to Sunil Kumar Dixit, chief technical strategist at Dixit added, “The current price action remains bearish for US crude as long as $84.50 is active resistance. On the downside, we can see a pullback towards $82.70 and $82. Major support is seen at $81. A day close below $81 can open the door to $77.50.”

Thursday’s drop in oil prices occurred despite the U.S. gross domestic product (GDP) growth surpassing expectations, with a 4.9% annual rate for the third quarter, reinforcing the notion of a ‘soft landing’ for the economy. Although numerous Wall Street economists had raised concerns about the potential for a recession as the Federal Reserve implemented aggressive rate hikes to counter inflation, market apprehensions about specific repercussions for the oil trade and the global economy were diminishing.

While there still existed a war premium associated with the possibility of contagion from the ongoing Middle East conflict, officials suggested that the concerns about specific consequences were easing. U.S. Treasury Secretary Janet Yellen stated, “Of course, there could be more meaningful consequences, but I think it’s pretty immature, especially [to discuss] about those. I think our focus should be on keeping this contained and not spreading.”

The war premium on oil has been receding since a report in The Wall Street Journal on Wednesday indicated that Israel had agreed to a U.S. request to delay its anticipated ground invasion of Gaza. This delay is to allow the Pentagon to deploy air defenses in the region for the protection of U.S. troops, as reported by U.S. officials and individuals familiar with Israeli planning.

The Pentagon is working to expedite the deployment of nearly a dozen air defense systems to the region, including for U.S. troops stationed in Iraq, Syria, Kuwait, Jordan, Saudi Arabia, and the United Arab Emirates, to shield them from missiles and rockets. U.S. officials have successfully persuaded the Israelis to hold off until these defenses can be put in place, expected to occur later in the week.

Israel is also taking into account efforts to provide humanitarian aid to civilians in Gaza and diplomatic initiatives aimed at securing the release of more hostages held by Hamas, as reported by The Wall Street Journal.

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