Oil Prices Drop Due to Middle East Conflict and Economic Concerns
Ongoing issues in the Middle East and worries about the economy affect oil prices.
Oil prices fell because of problems in the Middle East and concerns about the economy in the U.S. The Federal Reserve's decision to keep interest rates higher also influenced the drop.
The price of Brent crude oil went down more than 1%, trading above $88 per barrel during the day. West Texas Intermediate oil also fell about 3% before recovering and trading above $84 per barrel.
This happened because the U.S. saw a lot of economic activity, with the Gross Domestic Product (GDP) growing at an annual rate of 4.9% last quarter. The Federal Reserve, which is in charge of money, will have an important meeting soon.
Quincy Krosby, who is in charge of strategy at LPL Financial, said, "The Fed's job isn't done." People think the Federal Reserve won't raise interest rates at the next meeting, but they worry the Federal Reserve might say they need to raise rates later this year if prices keep going up and the economy stays strong.
The U.S. dollar also got stronger on Thursday, which made oil prices and other things cost more. Since oil is paid for in dollars, this made oil prices go down.
People who trade oil are also thinking about the war between Israel and Hamas. They hope the war won't get bigger. Diplomats in the area are working to stop a big fight in Gaza.
A while ago, oil prices went up a lot after Hamas surprised Israel with an attack. People thought the fight might get worse, so the price of Brent and West Texas Intermediate oil went up more than 4% in one day.
Before the attacks happened, some people were starting to worry about how much oil people would need. The price of oil went up a lot in September because some countries that make oil decided to make less, and Saudi Arabia, a big oil country, also decided to make less.
Tamar Essner, who works at Vectis Energy Partners, said, "People have been thinking less and less about what could go wrong and oil prices have been going down." She said people aren't worried because there is still a lot of extra oil. Saudi Arabia alone decided to make a million fewer barrels of oil each day, in addition to what all the other countries decided to do.
Essner thinks the biggest problem soon might be if the leaders in the U.S. decide to say no to oil from Iran. But she thinks that will be more talk than action because it will be hard to make it happen. Most of the oil from Iran goes to China, and they don't use dollars to pay for it.
Last week, a report from the Energy Information Administration said that the amount of oil the U.S. has went up by 1.372 million barrels. That surprised a lot of people because they thought the number would only go up by 240,000 barrels.