Oil prices increased as escalating tensions in the Middle East continue to fuel fears of a disruption to crude oil flows. Brent climbed to $74.83 per barrel during early trading hours on Thursday.
US benchmark West Texas Intermediate (WTI) increased by 1.4% to $71.08 per barrel after closing at $70.1 in the prior session.
Oil prices had jumped strongly after Iran, a key producer and member of the Organization of the Petroleum Exporting Countries (OPEC), fired around 180 ballistic missiles at Israel.
According to Iran’s Islamic Revolutionary Guard Corps (IRGC), the attack was in response to the assassinations of Hamas leader Ismail Haniyeh, Hezbollah leader Hassan Nasrallah and IRGC commander Abbas Nilforoshan.
However, data from the US Energy Information Administration (EIA) released late Wednesday limited upward price movements, easing supply disruption worries.
US commercial crude oil inventories increased by around 3.9 million barrels during the week ending Sept. 27, against the market prediction of a 1.5 million barrels draw. Gasoline inventories also rose by about 1.1 million barrels during the same period.
Oil prices continued their move higher yesterday amid the uncertainty over how Israel will respond to Iran’s missile attack. At one stage yesterday, ICE Brent was up as much as 3.5% and broke above US$76/bbl.
However, the market was unable to hold onto all of these gains, finishing the day less than 0.5% higher, ING commodities strategist Warren Patterson said in a note.
Analyst said the fizzling out of the rally is somewhat surprising, given the increased risk facing the oil market.
‘There have been suggestions that Israel could target Iranian oil facilities, which would have the potential to push oil prices significantly higher depending on the scale of the attack’.
Iran exports roughly 1.7m b/d of crude oil, so the potential impact is meaningful. However, an attack on oil facilities may upset the US, particularly as American move closer to elections.
“…a more limited response would be hitting launch sites used for the recent missile attack, while a significant escalation would be if Israel decided to target Iranian nuclear facilities” ING analyst said.
OPEC+ recommended no change to its output policy after its Joint Ministerial Monitoring Committee (JMMC) meeting yesterday.
The focus of the meeting appeared to be on compliance and ensuring the likes of Iraq, Kazakhstan and Russia make up for producing above their target levels for much of the year.
There were also reports that Saudi Arabia previously warned members that oil prices could fall to as low as $50/bbl if members do not stick to their production targets, a possible warning that if other members do not follow the deal, the Saudis would be willing to start a price war.
Source: dmarketforces.com
