Oil Unwinds Conflict-Led Gains as Israel Rethinks Invasion

Liubov Georges
By  Liubov Georges , DTN Energy Reporter

WASHINGTON, D.C. (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange accelerated losses Monday afternoon, sending international crude benchmark below $90 per barrel (bbl) in reaction to unconfirmed reports Hamas released 50 hostages captured on Oct. 7, opening the door for a political solution backed by U.S. and European allies.

Israel is rethinking the scope of a ground incursion into Gaza, according to multiple reports, reducing the risk of a regional conflict in the Middle East and disruption of crude oil supplies. Unconfirmed reports, citing a senior Israeli official, suggest Hamas released around 50 dual-national hostages Monday who have been handed over to the Red Cross. The additional releases have not been confirmed by U.S. news sources.

Hamas, a designated terrorist organization in the United States and European Union, has warned that a ground invasion would reduce the likelihood of hostage releases.

While Israel continues to destroy targets in Gaza, there are growing calls from within Israel and the international community to delay a large-scale offensive against the besieged enclave. Clearly, the United States and European allies are leaning heavily on

Israeli President Benjamin Netanyahu's war cabinet to find a political solution to the ongoing crisis. The situation remains fluid.

Oil has advanced roughly 5% since the Oct. 7 attack on Israeli civilians even though oil flows out of the Middle East have remained largely unaffected.

Hedge funds and money managers purchased an equivalent of 10 million bbl across the spectrum of petroleum futures and options during the week ended Oct. 17, with heavy rotation from West Texas Intermediate to the Brent contract, reflecting the international scale of the conflict. Goldman Sachs late last week estimated Iranian oil production could be 400,000 barrels per day (bpd) lower next year as a result of the developments in Israel, which would lift its Brent oil price forecast for the second half of 2024 by $5 to $105 bbl.

Separately, Chevron Corporation said it would buy all outstanding shares of Hess Corporation in an all-stock transaction valued at $53 billion, with the total enterprise value of the transaction including debt at $60 billion. The acquisition upgrades and diversifies Chevron's advantaged portfolio, with Hess' Bakken assets adding another leading U.S. shale position to Chevron's DJ and Permian basin operations. Hess' Stabroek block in Guyana is expected to deliver production growth in the next decade.

"These are two great American companies coming together to be even stronger at a time when investment in American energy is important from the standpoint of jobs and from the standpoint of energy security," Chevron Chief Executive Mike Wirth said in an interview Monday.

On Oct. 11, ExxonMobil Corporation announced an all-stock transaction for Pioneer Natural Resources, with a total enterprise value for the transaction with debt at approximately $64.5 billion. The merger combined assets in the Midland and Permian basins, with ExxonMobil's Permian production more than doubling to 1.3 million bpd following the close of the transaction. Both mergers highlight the consolidation in U.S. oil production.

At settlement, NYMEX West Texas Intermediate futures for December delivery fell $2.59 to $85.49 bbl, while Brent December futures on ICE slid below $90 to $89.83 bbl, down $2.33. NYMEX November ULSD futures declined $0.0611 to $3.0955 gallon, while front-month RBOB futures fell $0.0451 to $2.3285 gallon.

Liubov Georges can be reached at liubov.georges@dtn.com

Liubov Georges