Oil rises 3% to 1-week high on Israel-Hamas war concerns; Brent settles at $90
Oil prices climbed about 3 per cent to a one-week high in the previous session on worries that tensions in Israel and Gaza could spread into a wider conflict that could disrupt global crude supplies. Early in the session, oil prices soared by more than $2 a barrel after the US military struck Iranian targets in Syria. Prices briefly turned negative on mediation talks between the militant Hamas group and Israel led by Qatar in coordination with the US.
Brent futures rose $2.55, or 2.9 per cent, to settle at $90.48 a barrel, while US West Texas Intermediate (WTI) crude rose $2.33, or 2.8 per cent, to settle at $85.54. Brent’s premium over WTI rose to its highest since March, making it more attractive for the energy firms to send ships to the US to pick up crude for export, according to reports.
WTI Crude oil futures plunged more than 2 per cent on Thursday, amid signs of weakening US demand, a strong dollar and slight ease in middle-east tensions. Ongoing diplomatic efforts to delay an expected ground invasion of Gaza by Israeli forces took some steam off the war premium.
For the week, Brent was down about 2 per cent and WTI down about 4 per cent, according to news agency Reuters. Back home, on the Multi Commodity Exchange (MCX), crude oil futures due for a November 17 expiry, settled 2.99 per cent higher at ₹7,153 per bbl, having swung between ₹6,932 and ₹7,154 per bbl during the session so far, against a previous close of ₹6,945 per barrel.
Also Read: Crude oil deficit to high inflation: How can the Israel-Hamas war impact Indian economy? — Explained
What’s driving crude oil prices?
-Israeli air and ground forces were stepping up operations in the Gaza Strip amid reports of heavy bombing of the besieged enclave. Several countries, including many Arab states, have urged Israel to delay a planned ground invasion that would multiply civilian casualties and might ignite a wider conflict.
-Middle East developments have so far not directly affected the global oil supplies, but many fear disruptions of exports from major crude producer and Hamas backer Iran and others.
-Goldman Sachs analysts retained their first-quarter 2024 Brent crude price forecast at $95 a barrel but added that lower Iranian exports could cause baseline prices to rise by 5 per cent.
-US consumer spending surged in September but was seen cooling off in early 2024. Some economists believe the US Federal Reserve is done raising interest rates to fight inflation, which can slow economic growth and reduce oil demand.
Where are prices headed?
‘’Crude oil prices declined in response to a pessimistic growth outlook in the Euro-zone and the robust performance of the dollar index. The dollar index has maintained its position above 106, and US 10-year bond yields are currently at 16-year highs, which has curbed the upswings in global commodity prices,” said Rahul Kalantri, VP Commodities, Mehta Equities.
Notably, better-than-anticipated US third-quarter GDP data provided some support to crude oil prices at lower levels. ‘’Anticipating the week ahead, we foresee continued volatility in crude oil prices, influenced by fluctuations in the dollar index and ongoing tensions in the Middle East,” added Kalantri.
Ravindra Rao, CMT, EPAT, VP – Head Commodity Research, Kotak Securities said, ‘’Markets remain on the edge as US military forces conducted self-defense strikes on two facilities in eastern Syria, a rocket reportedly struck an Egyptian border town and Iranian FM is constantly threatening of a wider conflict in middle east. We expect oil prices to remain cushioned.”
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Updated: 28 Oct 2023, 07:41 PM IST
