Oil rises 2% on US crude storage draw, Israel-Hamas war; Brent at $91/bbl
Oil prices climbed about 2 per cent to a two-week high on Wednesday, October 18, on a bigger-than-expected US storage draw and as rising tensions in the Middle East threaten to disrupt oil supplies from the region, with Iran calling for an oil embargo on Israel. Traders expect that US President Joe Biden’s visit to the Middle East is likely to involve balancing support for Israel and rally Arab states to help prevent a regional conflict.
Brent futures rose $1.46, or 1.6 per cent, to $91.36 a barrel, while US West Texas Intermediate (WTI) crude rose $1.45, or 1.7 per cent, to $88.11. This put Brent on track for its highest close since September 29 and WTI on track for its highest close since October 3. Earlier in the session both benchmarks rose more than $3 a barrel, according to news agency Reuters.
Back home, on the Multi Commodity Exchange (MCX), crude oil futures due for a October 19 expiry, was last trading higher by 2.2 per cent at ₹7,350 per bbl, having swung between ₹7,255 and ₹7,500 per bbl during the session so far, against a previous close of ₹7,192 per barrel.
What’s driving crude oil prices?
-The US Energy Information Administration (EIA) said energy firms pulled 4.5 million barrels of crude from stockpiles during the week ended October 13.
-It was the fourth crude storage decline in five weeks and compares with a 1.7 million barrel draw during the same week last year and a five-year (2018-2022) average build of 2.5 million barrels for this time of year.
-The decline included a drop of 0.8 million barrels at the Cushing storage facility in Oklahoma to its lowest level since October 2014, prompting concerns about the quality of oil remaining in the tanks. Cushing is the delivery point for US oil futures on the New York Mercantile Exchange or NYMEX.
-Markets factored in risk premiums after hundreds of Palestinians were killed in a blast at a Gaza City hospital earlier this week that Israeli and Palestinian officials blamed on each other.
-In the Saudi city of Jeddah, Iranian Foreign Minister Hossein Amirabdollahian urged members of the Organisation of Islamic Cooperation to impose an oil embargo on Israel. The Organization of the Petroleum Exporting Countries (OPEC) is not planning to take any immediate action on Iran’s call, four sources from the producer group told Reuters. Iran is an OPEC member.
Where are prices headed?
Crude oil exhibited significant volatility, rebounding from its earlier low following the release of the American Petroleum Institute’s reports, according to analysts.
‘’Oil prices surged in response to heightened tensions in the Middle East, stemming from a tragic incident in which 500 Palestinians lost their lives in an explosion at a Gaza City hospital on Tuesday. The possibility of an escalation in the Israel-Hamas conflict is bolstering crude oil prices,” said Rahul Kalantri, VP Commodities, Mehta Equities Ltd.
‘’We anticipate that crude oil prices will continue to be marked by volatility during today’s trading session. In terms of technical levels, crude oil finds support at $86.50–$85.40, while resistance is positioned at $88.60–$89.50 for today’s session. In the context of INR, the support for crude oil stands at ₹7,110-7,020, with resistance at ₹7,290–7,350,” added Kalantri.
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Updated: 18 Oct 2023, 10:27 PM IST
