LONDON: Oil fell to $111 a barrel yesterday as ample supplies outweighed worries over fighting between Israel and Palestinians in the Middle East.
Concern over the well-being of Europe’s economy also pressured oil and other commodities after ratings agency Moody’s stripped France of its prized triple-A badge due to an uncertain fiscal and economic outlook.
Brent crude was down 70 cents to $111.00 per barrel by 1430 GMT. US crude fell 95 cents to $88.33.
“The market has not over-reacted to the situation as there is no shortage of oil anyplace in the world and the area of the Middle East under question is not the oil producing region of the Middle East,” Dominick Chirichella, senior partner at Energy Management Institute in New York said in a research note.
“Thus at the moment there is no imminent threat for an interruption in the supply of oil.”
Investors are waiting to see if fighting subsides as world pressure intensifies for a ceasefire in the Gaza strip. US Secretary of State Hillary Clinton headed to the region with a message that escalation of the week-long conflict was in nobody’s interest. Some 110 Palestinians have died in a week of fighting, including 27 children.
Jefferies Bache analysts estimate oil has a $2.50 to $3 per barrel premium due to the Israel-Gaza conflict. “As far as the geopolitical issue is concerned, we feel that odds tilt in favour of some type of ceasefire or truce that could quickly force as much as $1-$.50 of security premium out of the market,” they said in a research note.