Brent crude oil fell to $86 as Middle East fears eased

Brent and WTI crude oil prices extended recent losses toward $86/b and $80/b levels respectively on Monday morning, after a lack of immediate escalation between Iran-Israel, and despite the new U.S. sanctions on Iran’s oil sector.

The crude oil prices posted their first back-to-back weekly decline in 2024 as investors believe that the regional tensions in the Middle East won’t convert into a general military conflict that disrupts global oil supplies in the short term.

The price of the Brent contract fell nearly 1.50% this morning toward the 86/b support level after losing 3.50% last week as Middle East fears eased, after Iran downplayed Israel’s response to their unexpected drone and missile strike on Israel in mid-April, indicating that an escalation of hostilities in the oil-rich region might be avoided.

Brent crude oil chart

Both Brent and WTI oil prices initially rallied 3% to $91/b and $86/b respectively on Friday morning after explosions were heard in the Iranian city of Isfahan in what sources described as an Israeli attack, before plunging to the current levels after Tehran played down the incident and said it did not plan to retaliate.

Hence, oil traders have also ignored the newest sanctions on Iran’s oil sector passed by the U.S. House during the weekend following the unprecedented drone attack on Israel. Most of Iran’s oil exports, approx. 1.2 million barrels per day (bpd), are traveling to China, mainly on independent refineries.

Despite the current losses, the oil prices remain positive for the year so far, adding over 10% due to the recent geopolitical tensions in the Middle East, and OPEC+’s supply cuts that have tightened the global oil market.

OPEC+ members, led by de-facto leaders of Saudi Arabia and Russia, extended voluntary output cuts of 2.2 million barrels per day (bpd) until the end of June, helping oil prices elevated from February’s lows of $77/b to over $85/b before the outbreak of Middle East crisis in early April.