Oil falls after hitting highest in more than a month on risk of Middle East war, by Reuters

(Reuters) – Oil prices fell in early Asian trading on Tuesday as traders took profits after prices rose to their highest level in more than a month on Monday amid fears the Middle East could be on the brink of a regional war.

Fighting in the Middle East intensified after Iran-backed Hezbollah fired rockets at Israel’s third-largest city, Haifa, and Israel appeared poised to expand its offensive into Lebanon, a year after Hamas’ attack on Israel that started Israel’s ongoing war in Gaza.

futures were down 23 cents, or 0.3 percent, at $80.70 a barrel by 0029 GMT. U.S. West Texas Intermediate futures were down 20 cents, or 0.3 percent, at $76.94 a barrel.

Both contracts rose more than 3 percent on Monday to hit their highest levels since late August, adding to last week’s gains that saw them soar more than 8 percent for their biggest weekly gains in more than a year .

The rally began after Iran launched a missile barrage on Israel on October 1. Israel has vowed to retaliate and is weighing its options, with Iran’s oil facilities seen as a possible target.

However, some analysts believe an attack on Iran’s oil infrastructure is unlikely and have warned that oil prices could face considerable downward pressure if Israel focuses on any other target.

Even if an attack were to target Iran’s oil facilities, there is 7 million barrels per day of spare supply capacity within the Organization of the Petroleum Exporting Countries (OPEC) to offset the loss of its oil output, ANZ Bank analysts noted on Friday.

Meanwhile, Hurricane Milton intensified into a Category 5 storm on its way to Florida after forcing the shutdown of at least one oil and gas rig in the US Gulf of Mexico on Monday.

{{8849|US crude oil inventories are expected to rise by 1.9 million barrels in the week ended Oct. 4, according to a preliminary Reuters poll. The American Petroleum Institute is due to release its US inventories number at 2030 GMT on Tuesday, followed by the official number from the Energy Information Administration at 1430 GMT on Wednesday.