Oil Prices Climb as Tension Builds in Middle East
Oil prices rose on Wednesday in the global commodity market with the Brent front-month contract trading above US$80 per barrel as tensions in the Middle East escalated.
Tension in the region spike following reports that Hamas chief Ismail Haniyeh has been assassinated in Iran. The details are still emerging from Iran with the market allocating a higher risk premium for oil, said ING commodities strategists.
Meanwhile, a bullish inventory report by the American Petroleum Institute (API) further supported the oil market. The API reported overnight that US crude oil inventories fell by 4.5m barrels, compared to the market expectations for a draw of just 0.8m barrels.
Crude stockpiles at Cushing decreased by 929k barrels. Meanwhile, the products also saw withdrawals with gasoline and distillate stocks falling by 1.92 million barrels and 322,000 barrels, respectively. The more widely followed EIA inventory report will be released later today.
At the press time, Brent crude traded at $79.56 per barrel, a rise of 1.91% from the closing price of $78.07 per barrel in the previous trading session.
The American benchmark West Texas Intermediate (WTI) traded at $76.29 per barrel at the same time, a 2.09% increase from the previous session that closed at $74.73 per barrel.
The Hamas group confirmed Haniyeh’s death in ‘a treacherous assassination’ in Tehran. In the early hours on Wednesday, the Iranian Foreign Ministry stressed that investigation is underway.
Israel has made no immediate announcement about the assassination. Concerns over a full-blown war between Israel and Hezbollah has grown amid an exchange of cross-border attacks between the two sides.
Official figures from the Energy Information Administration (EIA) will be released later in the day, and if a decrease in crude oil is confirmed, prices are expected to climb further.
The weakening of the US dollar against other currencies eased the rise in oil prices. The weak dollar is expected to enhance demand by making oil cheaper for those who use foreign currencies.
The US dollar index, which measures the US dollar’s value against other currencies, fell 0.17% to 104.145. Elsewhere, recent reports suggest that Nigeria’s government has agreed to sell crude oil to the Dangote Petroleum Refinery in Naira, in its effort to relieve pressure on the country’s foreign exchange reserves and stabilise domestic fuel prices.
The latest decision mandates the sale of 445k bbls/d of crude assigned for domestic use only. The refinery will also receive increased domestic crude supply as the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) mandates the sale of crude to local refineries by major oil producers before considering overseas export options.
It is reported that the refinery will have a total capacity of 650,000 bbls/d once fully operational, which would be enough to meet Nigeria’s entire petrol demand. #Oil Prices Climb as Tension Builds in Middle East
