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Crude-oil futures fell to their lowest level in nearly seven weeks Monday (Aug. 14), with concerns over global production eased by a ceasefire between Israel and Hezbollah militia and continued output from a key Alaskan oil field despite major repairs.
CBS MarketWatch reported that crude for September delivery was down $1.53 in afternoon trading at $72.82 a barrel on the New York Mercantile Exchange. It traded as low as $72.70, its weakest intraday level since June 28.
“The cease-fire in the Middle East seems to be holding, and fears that Prudhoe Bay could be down for months seems to have gone away,” said Phil Flynn, a senior analyst at Alaron Trading in Chicago.
“BP now says they can keep half [of its Prudhoe Bay oil field] open and this has given new hope to the world and optimism to the oil markets,” he said.
A United Nations-brokered cease-fire between Israel and the Lebanese group Hezbollah came into effect at 1 a.m. U.S. Eastern Time, potentially marking the end of a month-long conflict in which more than 1,000 people have died.
“This will certainly be another volatile week for crude as the Middle East situation will move markets in spite of the fact that neither Lebanon nor Israel has oil production,” said James Williams, an economist at WTRG Economics, calling the truce “fragile.”
“This cease-fire in the Israeli-Lebanon conflict should be regarded as bearish for oil,” said David Bakkegaard Karsbol, market strategist at Saxo Bank in a market call for clients.
“Also we are seeing some pipelines for BP in Alaska coming back. There has been a lot of talk about these pipelines being corroded.”
“We are maintaining a relatively bearish stance on oil from here,” he added.
But Michael Fitzpatrick, an analyst at Fimat USA, said in a note to clients that “geopolitical strife is bound to get considerably worse before it gets better, and so, this retreat in price represents a buying opportunity.”
BP said Saturday that it will be able to continue production from the Western side of its Prudhoe Bay oil field. The oil giant had previously said it would have to shut the entire oil field – the largest in the U.S. – sparking concerns of a global supply shortage.
BP added production from the Western half will be around 200,000 barrels a day, compared to the 400,000 barrels a day it was pumping from the entire field before the shutdown.