Oil prices fell on Monday, focused on market fundamentals, with Iran not escalating hostilities in the Middle East following a minor Israeli attack on Iran.
Brent futures were down 67 cents, or 0.77%, at $86.62 a barrel by 04:15 GMT. The May WTI crude oil contract expiring on Monday fell 63 cents, or 0.76%, to $82.51 a barrel, while the more active June contract fell 64 cents to $81.58 a barrel.
Brent crude oil prices failed to sustain their initial rise amid broad expectations that geopolitical tensions between Israel and Iran might end.
Both benchmarks rose more than $3 a barrel early Friday after explosions described as an Israeli attack were heard in the Iranian city of Isfahan. However, gains were capped after Tehran downplayed the incident and said it had no plans to retaliate.
The larger-than-expected rise in US crude oil inventories hasn’t helped either, with short-term price movements appearing to be more of a supply-side than demand-side story.
Last week, data from the Energy Information Administration showed U.S. crude stocks increased by 2.7 million barrels, nearly double analysts’ expectations for a 1.4 million-barrel increase.
Economic concerns have again become a bearish factor in the crude oil market, with prices under pressure from a large increase in US inventories and hawkish Fed policy that has led to a strong dollar.
The US House of Representatives on Saturday passed a package that includes an aid package for Ukraine and Israel, and measures that would allow the government to expand sanctions on Iran and its oil production.
However, markets shrugged off this news as the impact of the measures will depend on how they are interpreted and implemented. Consideration of the bill in the Senate will begin on Tuesday.
On Saturday, a member of the security forces, including Iranian-backed groups, lost his life in an explosion at an Iraqi military base. While the force commander said it was an attack, the army said the investigation was ongoing.
Separately, the Iran-backed Lebanese group Hezbollah said on Sunday it had shot down an Israeli drone on a combat mission in southern Lebanon.
Israeli forces and Lebanon’s armed group Hezbollah have been fighting each other for more than six months in parallel with the Gaza war, raising concerns that the war will escalate further. Volatility in the Middle East will continue to keep oil markets tense.
