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Crude oil prices began trading relatively flat on Monday after a hugely volatile week in which both WTI and Brent saw two significant drops before a massive rally on Friday.
In morning trade in Asia, Brent crude and West Texas Intermediate were trading at a slight loss of between 0.3% and 0.4% after soaring by some 6% on Friday in the biggest single-day rally since April. That brought the weekly gain for the U.S. benchmark to some 4%.
The latest Middle Eastern violence was one of the reasons for last week’s rally, along with a move by the U.S. Treasury to sanction two tanker operators for shipping Russian oil sold above the G7/EU price cap.
The sanction news sparked renewed concern about the security of Russian oil supply even though the Treasury repeated what it had said since the start of the sanction push—that it did not aim to curb supply.
Meanwhile, traders are waiting for the latest news from Gaza, after Israel warned the locals to move out as it prepares for the next step in its retaliation after the Hamas attacks from last weekend.
"Investors are trying to figure out the impact of the conflict while a large-scale ground assault has not begun after the 24-hour deadline that Israel first notified residents of the northern half of Gaza to flee to the south," a Nissan Securities analyst told Reuters earlier today.
“Historically, Middle East conflicts have rarely translated to a sustained rise in oil prices when they have not disrupted supply,” Han Zhong Liang, investment strategist at Standard Chartered told Bloomberg, meanwhile.
However, this time the situation seems to be different, according to Han, who also said that “there is a low risk of both direct and indirect supply disruptions.”
The biggest risk, according to analysts and other observers, appears to be a potential Iran's involvement in the violence. The country’s foreign minister warned recently that there was a risk of the conflict spreading if Israel continued on its current path.
Separately, the Iran mission to the UN warned that "If the Israeli apartheid's war crimes & genocide are not halted immediately, the situation could spiral out of control & ricochet far-reaching consequences - the responsibility of which lies with the UN, the Security Council & the states steering the Council toward a dead end."
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.