U.S. crude oil posts second weekly gain on Middle East war risk

Brent Crude Oil price in the US market increased nearly 9% last week, the highest weekly gain since March 2023. This is due to the increased war tension in the Middle East. Started with the launch of a missile barrage on Israel on October 1st. Israel decided to retaliate and the oil facilities of Iran are considered a possible target

According to some analysts, OPEC and its allies, including Russia collectively called OPEC+ spare capacity and US production could be able to balance any supply shocks. However long-term disruption in the oil market can happen in case of a broader regional conflict. OPEC already analyzed the availability of Oil and the needs of the market.

The market is also cautious about the lack of economic momentum in China as it is the world’s second-largest economy and the largest importer of crude oil. They have recently introduced new methods that can stimulate the economy, which was hit by the tepid industrial base and troubled industrial sector. Oil prices started with a slight retreat with brand features in the early trading on Monday as Asian Session ICE slipped by 0.35% to $77.78 per barrel while WTI  futures on the Nymex fell 0.23% to $74.21 per barrel.

Increased Tension in the Middle East

As per the report of Axios Israeli, officials stated that Iran’s oil production facilities within Iran and its strategic sites would be targeted by them in response to Iran’s ballistic missile attack. On Saturday Israel reassured that Iran will be attacked when the right time comes. But US President Joe Biden said to the reporters that the response from Israel is not confirmed yet.

Shana, the state news agency of Iran reported that the Kharg Island oil export terminal where 90% of oil exports are shipped was visited by the oil minister Mohsen Paknejad. According to the report he stated that it was a normal visit and they were not afraid about the crisis that may be ignited by their enemies.

According to OPEC(Organization of the Petroleum Exporting Countries), Iran is one of the top ten oil producers in the world . In August the production exceeded 3.3 m barrels per day which is the highest in the last five years. Iran’s oil exports also rose to a multi-year high of 1.7 billion barrels per day accounting for at least 2% of global oil production.

Oil price fluctuations

There has been a huge fluctuation in oil prices over the past years. It ranged from $66 to $96 per barrel. As the economic concern overridden the geopolitical risk. The oil market this year was affected by the weak demand from China and the global economic data. However, the fear of supply disruptions in the Middle East caused the escalation in price.

Technically it is the first time that the oil price rose above the 50-day moving average for the first time following last week’s spike. ICE futures data states that the net long position in brand crude increased by more than 20,000 in the week ending October 1st.

Larger Impact on the Markets

Rising geopolitical tensions caused an increase in oil prices, boosting energy and defense stocks but the prevailing risk-off sentiment in the global market. The same trend may continue for the upcoming weeks if the military conflict between Iran and Israel worsens further.

According to some other analysts, it is very unlikely to attack Iranian oil infrastructure and there will be considerable downward pressure on oil prices if they attack any other target.

According to ANZ bank analysts even if the Iranian oil facilities are attacked there is a reserve of 7 billion barrels per day within the Organisation of Petroleum Exporting Countries to make up for the loss of its oil output. Safer assets such as Gold and, the US dollar could consolidate further but there may be pressure on riskier assets such as Technology stocks . The US dollar may get strengthened over the  Euro as an impact of high energy prices on the European economy.

According to analysts, the crude oil price experienced significant volatility last week due to the tension within the Middle East and the US non-farm payroll data. The Chinese market is reopening this week and this can lead to the oil demand in China. 

Read More:

Martin Lewis’ Guide to Finding the Cheapest Gas and Electricity Deals in 2024

Leave a Comment

Kallanish Energy delivers key insights and trends to keep you informed and empowered in the energy industry.

Follow us

Cryptocurrency

Bitcoin

Altcoins

NFT

Airdrop

Guides

Reviews

Others

On Shore

Off Shore

Unconventionals

In Focus

Featured

Press Release

Company

About Us

Team

Advertising

Contact

Careers

Announcements

© 2024 Kallanish. All rights reserved.