Oct 3 2024: Oil prices climbed on Thursday as escalating conflict in the Middle East raised concerns about potential disruptions to crude flows from the key exporting region, though ample global supply tempered significant price increases.
By 06:15 GMT, Brent crude futures increased by 94 cents (1.27%) to $74.84 a barrel, while U.S. West Texas Intermediate (WTI) crude rose by 99 cents (1.41%) to $71.09. Both benchmarks had surged by more than $1 earlier in the session.
Yeap Jun Rong, a market strategist at IG, noted that despite initial market jitters due to geopolitical risks in the Middle East, some stability had returned, though traders remain watchful of any further developments, particularly concerning Israel’s response to Iran.
The tension heightened after Israel bombed central Beirut, following its deadliest day in a year of clashes with Iran-backed Hezbollah. The violence comes after Iran fired over 180 missiles at Israel, escalating hostilities across Lebanon and Syria.
The prospect of Israel targeting Iran’s oil infrastructure remains a key concern. However, IG analyst Tony Sycamore believes such a move is unlikely, as it could drive oil prices toward $80, which might not be well-received by Israel’s allies who are battling inflation.
Meanwhile, U.S. crude inventories rose by 3.9 million barrels last week, according to the Energy Information Administration, indicating that markets are well supplied. ANZ analysts noted that the swelling inventories show the market can withstand disruptions.
Although the geopolitical situation has added volatility, many investors remain unfazed. Jim Simpson, CEO of East Daley Analytics, emphasized that despite Iran’s attack, there’s enough global production to meet demand.
OPEC is seen as having enough spare capacity to offset a full loss of Iranian supply if tensions escalate, though concerns linger about Iran retaliating against neighboring Gulf oil installations. UBS analyst Giovanni Staunovo warned that further attacks on energy infrastructure in the region could strain OPEC’s capacity.
