The changing global oil equation

Despite the ongoing ‘war’ — if one is ready to call it a ‘war’ and not a genocide — in the Middle East, oil prices have largely remained unaffected. Last Friday, as the week approached its end, oil prices settled more than two per cent lower, with Brent crude futures down $1.92 or 2.3pc to $84.89 a barrel. West Texas Intermediate crude futures also fell $1.95, or 2.4pc to $80.51 a barrel. On a weekly basis, both benchmarks settled more than 6pc lower. Two reasons are being cited for this softening of the oil markets despite the ongoing ‘war’. The first is that the war has not spilled over. While neither Gaza nor Israel are any significant producers of crude oil, in the oil-producing Middle East, including Saudi Arabia, hardly 900 km from Gaza, life remains as usual. And despite some lip service, Iran, too, has shown little enthusiasm in entering the battle arena in any real sense. Thus, there is little ‘war’ premium. There was a knee-jerk reaction in the immediate aftermath of the Hamas attack on Israel on October 7. But even then, the price spike was not too great, and that too was brief.