Oil futures fell back slightly on Tuesday, consolidating after a surge in the previous session in reaction to a weekend attack on Israel by Palestinian militant group Hamas that sparked fears of a wider regional conflict.
West Texas Intermediate crude for November delivery
fell 15 cents, or 0.2%, to $86.23 a barrel on the New York Mercantile Exchange.
December Brent crude
the global benchmark, declined 22 cents, or 0.3%, to $87.93 a barrel on ICE Futures Europe.
WTI and Brent both soared more than 4% on Monday, after the wave of attacks on Saturday by Hamas, which were followed by retaliatory strikes by Israel on Gaza and Israel’s formal declaration of war against the group.
While crude saw a sharp jump on Monday, oil prices had fallen back significantly the previous week after hitting 2023 highs just shy of $100 a barrel for Brent and above $95 a barrel for WTI in late September.
Though Israel produces little oil, The Wall Street Journal reported Sunday that Iranian military officials had helped Hamas plan and coordinate the attack.
Iran congratulated Hamas on the attack but has denied a role in planning it.
Iranian crude output hit 3.1 million barrels a day, or mbd, in August, noted Carsten Fritsch, commodity analyst at Commerzbank, in a Tuesday note, the highest since U.S. sanctions came back into force in the fall of 2018, after the Trump administration withdrew from the Iranian nuclear accord (see chart below).
Though no official figures are available, it’s estimated that Iranian crude exports were as high as 2 mbd in August.
“The U.S. has apparently been pursuing a laissez-faire approach to the enforcement of sanctions in recent months so as to offset at least part of the decrease in OPEC+ supply. It is hardly likely to maintain this policy now given Iran’s open show of support for Hamas,” Fritsch said. Full enforcement of sanctions could cut Iranian exports by as much as 1 mbd.
“Though this would further tighten the oil market in the current environment, it would not result in the kind of acute shortage that would massively drive up prices,” he said.