Oil traded in a narrow range, with Israel yet to launch its expected ground offensive into the Gaza Strip and the US ratcheting up efforts to prevent the crisis from becoming a full-blown, regional conflagration.
Brent traded near $91 a barrel, after surging almost 6% on Friday to cap a major weekly gain. Over the weekend, US officials rushed to speak with Middle Eastern nations — including back-channel talks with Iran — to contain the conflict. Secretary of State Antony Blinken returns to Israel on Monday, and President Joe Biden is also considering a trip there in the coming days.
The global crude market has been transfixed by the confrontation following Hamas’ initial offensive against Israel amid concern that other states, especially Iran, may be drawn in. Any instability or escalation of fighting across the Middle East could jeopardize flows of crude from the region that accounts for about a third of worldwide supply, further tightening the market.
“I would be surprised if diplomacy works,” said Vivek Dhar, director of mining and energy commodities research at Commonwealth Bank of Australia, referring to US diplomatic efforts in the Middle East. “It’s hard to see how Israel indefinitely postpones its ground invasion.”
Blinken will make an unscheduled return to Israel today following talks with Arab officials, including in OPEC+ leader Saudi Arabia. Earlier, Iran’s Foreign Minister Hossein Amirabdollahian warned that there was a risk of conflict spreading if Israel continued its offensive. Tehran is Hamas’ main backer, and also supports the Hezbollah group in southern Lebanon.
With thousands of Israeli troops massed near Gaza, the Biden administration has also beefed up the US military presence in the region. The USS Eisenhower carrier strike group has been dispatched to the eastern Mediterranean to join the USS Gerald Ford, sent shortly after Hamas’ attack.
Crude’s timespreads continue to signal near-term strength, with the gap between Brent’s nearest two contracts at $1.51 a barrel in backwardation, compared with 89 cents about a month ago, as OPEC+ kingpins Saudi Arabia and Russia maintained output cuts, tightening the market.
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