DTN Oil

WASHINGTON (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange were mostly lower in early trading Monday, with the international crude benchmark sliding below $92 barrels (bbl) as Israel is seen delaying a ground offensive in Gaza under pressure from U.S. and European allies that want more time for negotiations aimed at releasing over 200 hostages captured by Hamas.

Oil traders continue to closely monitor developments in Israel's war against the Palestinian militant group Hamas, which launched a horrific attack from Gaza on Oct. 7, leading to a sharp escalation of geopolitical tensions in the oil-rich Middle East region. Leaders around the world, including U.S. and European allies, are reportedly working to contain the fighting and delay Israel's ground offensive into Gaza. Those diplomatic efforts eased investor concerns about the conflict morphing into a broader regional conflict.

So far, oil production in the region remains unaffected, but there is the risk Iran or its subsidiary Hezbollah in Lebanon could become directly involved in the conflict, entangling other oil producers in the region. Hezbollah has traded fire with the Israeli Defense Force in northern Israel.

Goldman Sachs estimates Iranian oil production could be 400,000 barrels per day (bpd) lower next year as a result of recent developments, which would lift their Brent oil price forecast for the second half of 2024 by $5 to $105 bbl.

The U.S. Treasury Department last week slapped new sanctions on Iran's ballistic missile and drone programs, with calls growing louder to toughen existing sanctions on its oil exports.

In financial markets, U.S. equity futures moved lower early Monday, while bond yields tested fresh multiyear highs in an extended selloff that could add another layer of volatility into the new trading week. A combination of strong macroeconomic data and recent comments from Federal Reserve officials suggesting the U.S. central bank is done hiking interest rates continue to push bond yields higher, while pressuring the U.S. dollar index. The working assumption is that the rise in longer-term yields could potentially substitute for another rate increase that slows the economy. Federal Reserve Chairman Jerome Powell stressed last week the U.S. economy has held up much better than anyone expected despite the Fed's aggressive monetary tightening campaign.

"It could be the case that the interest rates haven't been high enough for long enough. We certainly got a resilient economy on our hands," said Powell at the New York Economic Club on Oct. 19.

Similar sentiment was echoed in comments by Atlanta Federal Reserve Bank President Raphael Bostic and Philadelphia Federal Reserve Bank President Patrick Harker, who asserted it is time to hold the federal funds rate steady and allow the economy to absorb past hikes.

Near 7:30 a.m. EDT, NYMEX West Texas Intermediate futures for December delivery fell $0.47 to trade near $87.65 bbl, while Brent December futures on ICE slipped $0.36 to $91.80 bbl. NYMEX November ULSD futures added $0.01 to $3.1666 gallon, while front-month RBOB futures fell $0.0144 to $2.3592 gallon.

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