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Crude Oil Prices Surge on Middle East Tensions, Weekly Gains Hit Yearly High

5 Oct 2024 10:27 am
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Mumbai, 5 Oct (Commoditiescontrol): Crude oil prices closed higher on Friday, marking their largest weekly gains in over a year, as escalating tensions in the Middle East fueled concerns about a broader regional conflict. Brent crude futures rose by 43 cents (0.6%) to $78.05 per barrel, while U.S. West Texas Intermediate (WTI) gained 67 cents (0.9%) to close at $74.38 per barrel.

The market reacted to rising fears of a potential war between Israel and Iran after a series of violent exchanges. Israel had vowed to retaliate against Iran, following missile attacks on Tuesday. The missile barrage came after Israel assassinated the leader of the Iranian-backed Hezbollah, escalating hostilities in the region.

Despite the sharp rise in prices, gains were tempered by U.S. President Joe Biden's diplomatic intervention. Biden urged Israel to consider alternatives to attacking Iran's oil infrastructure, which pulled oil prices back after a nearly 2% surge during Friday’s session. On Thursday, oil benchmarks had spiked more than 5% after Biden confirmed the U.S. was in talks with Israel regarding its potential strike on Iranian energy facilities.

For the week, Brent crude posted an 8% rise, the highest since January 2023, while WTI jumped by 9.1%, its biggest weekly gain since March 2023. JPMorgan analysts noted that while an Israeli strike on Iranian energy facilities would not be the preferred action, low global oil inventories mean prices are likely to stay elevated until the conflict subsides.

Goldman Sachs projected a potential $10 to $20 per barrel rise in Brent prices by 2025 if Iranian oil production faces disruptions. Current global oil inventories are at their lowest levels on record, according to Kpler, with stocks at 4.4 billion barrels, significantly below last year’s levels when Brent was trading at $92.

Brokerage StoneX predicted a $3 to $5 per barrel increase in oil prices if Iran’s oil infrastructure is targeted. Meanwhile, Iran’s Supreme Leader, Ayatollah Ali Khamenei, made a public appearance, calling for continued resistance against Israel. Iran has warned that it would retaliate by targeting Israeli energy facilities if Israel strikes its oil fields.

Iran, a member of OPEC+, produces around 3.2 million barrels per day, accounting for 3% of global output. Despite the risks, analysts believe OPEC+ has enough spare capacity to offset any disruptions in Iranian supply. Additionally, supply concerns eased in Libya after oilfields and export terminals were reopened following a resolution of a leadership dispute within the central bank.

(By Commoditiescontrol Bureau: 09820130172)


       
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