Oil prices have fallen below $80 per barrel as global commodity markets face demand and supply risks ahead of the Organisation of Petroleum Exporting Countries and allies (OPEC+) Joint Ministerial Monitoring Committee meeting on Thursday.
As of the latest reports, Brent crude prices have decreased by 0.7%, settling at $79.75 per barrel, while the US West Texas Intermediate (WTI) crude has dropped by 0.8%, reaching $76.56 per barrel. Both benchmarks experienced a downward trend at the start of the week following an attack in the Israeli-occupied Golan Heights, which is expected to further impact the supply side.
The escalating geopolitical tensions in the Middle East, which houses a large portion of the world’s oil reserves, have heightened supply risks. Despite ongoing cease-fire negotiations, the region remains volatile. On Saturday, a missile attack on a football field in Majdal Shams, located in the occupied Golan Heights, resulted in the deaths of 12 people.
Israel has attributed the attack to Hezbollah, though the Lebanese group has denied involvement. Fears of a full-scale war between Israel and Hezbollah are growing amid a series of cross-border attacks between the two factions.
This conflict is unfolding alongside Israel’s deadly offensive on Gaza, which has claimed over 39,300 lives since October of last year.
Cease-fire talks and prisoner exchange negotiations between Hamas and Israel have hit a standstill, further complicating the situation as the Israeli delegation’s visit, initially scheduled for Thursday, has been postponed to next week.
The market outlook for crude demand remains pessimistic, especially concerning China, the world’s largest crude oil importer, which is currently grappling with a sluggish economic recovery. These demand concerns have contributed to the recent weakening of oil prices.
Market participants are also closely monitoring the US Federal Reserve’s (Fed) meetings scheduled for July 30-31. While investors largely anticipate that the Fed will maintain current rates, they are keenly awaiting indications of a potential rate cut in the upcoming September meeting.
Oil prices have been trading lower for three consecutive weeks. According to a note from ING, ICE Brent prices settled 1.82% lower last week, and with the market trading just above the $81 per barrel mark, the critical psychological threshold of $80 per barrel is in sight.
Analysts highlight that the current market weakness comes ahead of the OPEC+ Joint Ministerial Monitoring Committee meeting, set to take place online on Thursday.
Although the committee is not expected to recommend any changes to output policy, the recent market downturn is likely a concern, particularly if Brent prices fall below $80 per barrel. ING suggests that any unexpected developments could involve delaying the planned gradual easing of supply cuts set to commence in October.
