Crude oil prices extend gains on fears of wider conflict in West Asia | commodities

Oil prices extended gains on Monday, with Brent nearing $80 to take advantage of last week’s steepest weekly jump since the start of 2023 on fears of a wider conflict in the Middle East and a possible disruption of exports from the major oil-producing region.

Brent crude futures were up $1.30, or 1.7 percent, at $79.35 a barrel by 1201 GMT. U.S. West Texas Intermediate (WTI) crude futures were up $1.40, or 1.9 percent, at $75.78. WTI previously rose by more than $2.

Click here to connect with us on WhatsApp

Brent climbed more than 8% last week, while WTI rose 9.1% on the possibility that Israel could strike Iranian oil infrastructure in response to Iran’s October 1 missile attack on Israel.

The potential escalation of the conflict has offset growing demand pressures, said Priyanka Sachdeva, an analyst at Phillip Nova.

Rockets fired by Iran-backed Hezbollah hit Israel’s third-largest city, Haifa, on Monday morning. Meanwhile, Israel appeared poised to expand ground incursions into southern Lebanon on the first anniversary of the Gaza war, which spread the conflict across the Middle East.

This spread has raised fears that the United States, Israel’s superpower ally, and archenemy Iran will be absorbed into a wider war.

ANZ Research, however, expects any immediate supply to be relatively small.

“We see a direct attack on Iran’s oil facilities as the least likely response among Israel’s options,” he said, referring to the buffer provided by the OPEC producer group, reserve capacity of 7 million barrels per day.

The Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, collectively known as OPEC+, are set to start raising output from December after cutting in recent years to support prices due to weak global demand.

OPEC+ has enough spare oil capacity to compensate for Israel cutting off supplies to Iran, but would struggle if Iran retaliated by attacking facilities in neighboring Gulf countries, analysts said.

When the Middle East conflict began a year ago, Brent was at $88.15, but prices are now about $10 lower.

“While nothing can match the excitement the conflict has brought to the oil community, it has been well and truly drowned out by macroeconomic considerations that have thwarted any notion of global demand growth,” said John Evans of oil broker PVM .

(Reporting by Paul Carsten in London and Gabrielle Ng and Emily Chow Editing by David Goodman)

First publication: 07 October 2024 | 18:01 IST