Fear of bombing of Iranian wells drives up oil prices again
Oil prices continued to rise on Thursday, boosted by concerns that conflict in the Middle East could disrupt the flow of crude oil to the region. Brent crude futures rose 3.8% to $76.72 a barrel on Thursday, the biggest gain since Aug. 30. While US West Texas Intermediate crude oil rose $23.85, or 4.07%, to $72.95, its highest price in over a month. Although this is nowhere near the 92 euros that both links reached when this phase of clashes between Israel and the Lebanese militant group Hezbollah began.
“Markets fear that Israel will attack Iranian oil infrastructure, which could provoke Iranian retaliation. There are concerns that this escalation could lead to Iran blocking the Strait of Hormuz or attacking Saudi infrastructure, as happened in 2019,” said Ashley Kelty, an analyst at Panmure Gordon, as quoted by Reuters.
Fear, which was fueled by the words of US President Joe Biden, who, when asked by reporters, did not deny that the US was going to intervene in Israel’s decision. For now, Biden insists they have “warned” their ally that the response to enemy attacks must be “proportionate,” without defining the scope of that term. In any case, the American President ruled out that any Israeli action will be implemented this Thursday, since the Jewish religion celebrates its New Year today.
Netanyahu threat
Israeli Prime Minister Benjamin Netanyahu said Iran would pay for a missile attack on Israel on Tuesday, while Tehran said any retaliatory strike would be met with “huge destruction”, raising fears of a wider war. “From now on, it remains to be seen what the Israeli reaction will be, and I suspect it will come after the end of Rosh Hashanah tomorrow,” said IG market analyst Tony Sycamore, referring to the Jewish New Year.
Meanwhile, U.S. crude oil inventories rose 3.9 million barrels to 417 million barrels in the week ended Sept. 27, the Energy Information Administration (EIA) said, compared with Reuters forecasts for a decline of 1.3 million barrels. “The rise in US inventories demonstrates that the market is well stocked and can withstand any disruption,” ANZ analysts said in a note.
OPEC movement
Concerns are mitigated by OPEC’s oil production capacity and the fact that global crude supplies have not yet been disrupted by unrest in the main producing region.
OPEC has enough spare capacity to compensate for the complete loss of Iranian supply if Israel shuts down that country’s capacity.