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Oil begins week lower after Israel says ‘concluded’ Gaza strikes

The sun sets behind a crude oil pump jack on a drill pad in the Permian Basin in Loving County, Texas, U.S. November 24, 2019. REUTERS/Angus Mordant/File Photo
The sun sets behind a crude oil pump jack on a drill pad in the Permian Basin in Loving County, Texas, U.S. November 24, 2019. REUTERS/Angus Mordant/File Photo

Oil prices fell in early Asian trade on Monday after Israel said it had “concluded” a series of strikes in southern Gaza, slightly easing concerns about supply from the Middle East.

Brent crude futures were 29 cents, or 0.4 per cent lower, at $81.90 a barrel, while US West Texas Intermediate crude futures were down 28 cents, or 0.4 per cent, at $76.56 a barrel at 0746 GMT.

Geo-political risks including a feared broadening of the Israel-Palestinian conflict across the region and potential oil supply disruption in the Middle East pushed prices up by about 6 per cent last week.

The Israeli military said on Monday it had conducted a “series of strikes” on southern Gaza that have now “concluded,” days after Israeli Prime Minister Benjamin Netanyahu rejected a ceasefire proposal from Hamas.

Logistics disruptions in the Red sea remained front and centre of investor concerns. The United Kingdom Maritime Trade Operations (UKMTO) agency said early on Monday it had received a report of a ship being attacked by two missiles south of Yemen’s Al Mukha.

Iran-aligned Houthi militants in Yemen, who control the country’s most densely populated regions, have repeatedly dispatched drones and fired missiles at commercial ships since mid-November.

They say the attacks are a response to Israel’s military actions in Gaza. The campaign has rocked global shipping, leading several companies to halt Red Sea journeys and opt for a longer and more expensive route around Africa.

While supply concerns in the Middle East remained relatively heightened, news from the US eased some worries.

US energy firms increased oil and natural gas rigs to their highest since mid-December, potentially signalling an increase in output. Domestic production returned last week to a record 13.3 million barrels per day (bpd).

Demand concerns remained, as a Federal Reserve official said she had no interest in recommending an interest rate cut, adding to the chorus on further reining in inflation. Higher interest rates slow economic growth, which curbs oil demand.

Trading in Asia hours has been thin as most of the region including China, Hong Kong, Japan, South Korea, Singapore, Taiwan, Vietnam and Malaysia are closed for holidays.

Mainland China’s financial markets are closed for the Lunar New Year holiday and will resume trade on Monday, Feb 19. Hong Kong trade will resume on Feb. 14.

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