2/2

© Reuters. FILE PHOTO: Crude oil storage tanks are seen from above at the Cushing oil hub, appearing to run out of space to contain a historic supply glut that has hammered prices, in Cushing, Oklahoma, March 24, 2016. REUTERS/Nick Oxford//File Photo

2/2

By Robert Harvey

LONDON (Reuters) -Oil prices slipped on Monday as investors continued to focus on the situation in the Middle East, where diplomatic efforts are intensifying in an attempt to contain the conflict between Israel and Hamas.

futures fell 41 cents, or 0.44%, to $91.75 a barrel, as of 1204 GMT. U.S. West Texas Intermediate crude futures were down 55 cents, or 0.62%, at $87.53 a barrel.

Both benchmarks traded over $1 a barrel lower than their previous settlement price at their nadir in Monday’s session.

The intensification of diplomatic efforts to prevent the Israel-Hamas conflict from further escalation could have calmed oil prices on Monday.

“Recent diplomatic developments helped ease tensions, bringing some hope of a de-escalation in the war,” said ActivTrades analyst Ricardo Evangelista.

European Union leaders will call for a “humanitarian pause” in the conflict this week so that aid can reach Palestinians in Gaza, with the leaders of France and the Netherlands set to visit Israel this week.

Aid convoys started to arrive in the Gaza Strip from Egypt over the weekend.

U.S. President Joe Biden, who visited Israel last week, had calls on Sunday with the leaders of Canada, France, Britain, Germany and Italy.

“There is some relief in the oil market that Israel is holding off on a planned ground incursion of northern Gaza to negotiate a release of hostages, which opens up a window for diplomacy,” added Vandana Hari of Vanda (NASDAQ:) Insights.

But Israel continued its bombardment of Gaza on Monday after launching air strikes over southern Lebanon overnight.

Both oil benchmarks notched 1% week-on-week gains for the last two weeks, on fears of potential supply disruption in the Middle East — the world’s biggest oil-supplying region — if the conflict were to spread.

“Escalating wrath in the region will strengthen economic headwinds, potentially rising oil prices will push global inflation higher, monetary tightening could resume, and global oil demand growth will be dented,” said PVM analyst Tamas Varga.

Elsewhere, Norway’s crude production fell to 1.64 million barrels per day (bpd) in September according to Norwegian Petroleum Directorate (NPD) data released on Monday, down from 1.79 million bpd in August and below forecasts of 1.73 million bpd.