(Bloomberg) — Oil held steady as broader market weakness and concerns about a global glut of crude undercut gains from escalating tensions in the Middle East.
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West Texas Intermediate edged up near $68 a barrel, while Brent topped $71. Israel conducted military strikes across Gaza, shattering a ceasefire with Hamas, while the US increases pressure on Iran. Capping oil’s advance, US equities slid and the dollar strengthened, making commodities priced in the currency less attractive.
“Crude has been pricing in only a minimal geopolitical risk premium as tensions between Israel and Hamas resurface,” said Rebecca Babin, a senior energy trader at CIBC Private Wealth Group. “Most traders view the premiums as selling opportunities, positioning for inventory builds later in the year and increasing macroeconomic risks.”
Crude remains on track for a quarterly loss due to a confluence of bearish factors. An escalating global trade war threatens demand, while OPEC and its allies are set to raise production starting in April. That’s as the global market was already set for a glut, according to the International Energy Agency.
US President Donald Trump was also due to talk to his Russian counterpart Vladimir Putin on Tuesday to negotiate an end to the war in Ukraine.
Still, some market participants are have been quick to hedge against a pickup in geopolitical risk. Premiums on bearish put options declined relative to bullish calls on Monday, and the day’s trading was dominated by a flurry of $100-a-barrel wagers.
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–With assistance from Yongchang Chin.
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