Europe’s economic woes indicating more troubles for Germany and Britain — two of the bloc’s most influential members — also pressured oil markets.
New York-traded West Texas Intermediate, or WTI, crude for December delivery, settled at $83.74, down $1.75, or 2% on the day. On Monday, WTI fell 2.9%.
The US crude benchmark rose 2% last week and around 6% the prior week. Tuesday’s session low was $82.97, putting it not too far from the two-month low of $81.50 struck on October 6, a day before the outbreak of fighting in Gaza.
UK-origin Brent crude for December delivery settled at $88.07, down $1.76, or nearly 2%. Brent fell 2.5% in the prior session.
Last week, the global crude benchmark rose 1.4%, adding to the prior week’s gain of 7.5%. Tuesday’s session low for Brent was $87.36.
Oil’s rally over the past two weeks was driven by global shock over the death toll emanating from Israel’s response to the Oct 7 attacks carried out by Hamas, and concerns of a contagion should the crisis spill over and impact neighboring countries, which include some of the biggest oil producers such as Saudi Arabia, the United Arab Emirates, Iraq and Kuwait.
Conversely, the market’s retreat comes amid diplomacy efforts by the United States and other world powers in convincing Israel to delay a ground assault on Gaza while they try to negotiate the release of an estimated 200 Israeli hostages being held by the Palestine militant group.
Adding to Wednesday’s bearish mood in oil was dire economic data out of Europe. German readings suggested a recession was underway. Britain's businesses reported another monthly decline in activity, highlighting recession risks ahead of the Bank of England's interest rate decision next week.
“I think it’s beginning to dawn on some people that you can’t put black gold and gold in the same bucket when looking for a hedge to this war,” John Kilduff, partner at New York energy hedge Again Capital, said, referring to oil by a popular market parlance.
He said oil derived its net worth from consumption, while gold acts more as an insurance against economic and political troubles.
“The truth is there’s been no direct impact thus far on the oil trade from the crisis in Gaza and, therefore, it’s only right that crude prices give back the gains they’ve been running up the past two weeks,” he said.
Gold hit three-month highs last week as investors sought a hedge to the war, with New York traded futures breaching $2,000 an ounce. It has eased since from those highs but remains largely in a bull market, technical charts show.