Oil price gives up gains since start of Israel-Hamas war

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Oil prices tumbled to the lowest in more than three months on Tuesday, reversing all gains made since Hamas attacked Israel on October 7, with hedge funds betting that the conflict will not draw in oil-rich neighbouring countries.

Brent crude, the international benchmark, settled 4.2 per cent lower at $81.61 a barrel, dropping back to levels last seen in late July and more than wiping out the rally that began in early October. The US benchmark West Texas Intermediate fell 4.3 per cent to $77.37 a barrel.

Hamas’s attacks and Israel’s subsequent declaration of war sparked fears of a wider conflict that could hit the Middle East’s oil and gas supplies, pushing prices up more than 10 per cent to almost $93 a barrel by the middle of last month.

But those fears have largely subsided among traders, who believe there is little imminent danger of the conflict escalating and drawing in countries such as Iran.

“While the death toll in Gaza from Israeli air strikes continues to rise to unimaginable levels, the prospect for the conflict spreading to the oil-rich part of the Middle East is increasingly being put at near-zero,” said Ole Hansen, head of commodity strategy at Saxo Bank.

Hedge funds are also exiting long positions taken up following the outbreak of the war. In the week to October 31, they sold off the equivalent of more than 70mn barrels of crude oil across Brent and WTI, the two market benchmarks, according to data from the US Commodity Futures Trading Commission.

Traders were now “discounting possible escalation” in the Middle East and instead turning their attention to lacklustre economic data coming out of the US, Europe and China, said Helima Croft, head of commodity strategy at RBC Capital Markets.

“Many of them got burnt” last year after overestimating the scale of disruption to oil supplies following Russia’s invasion of…