Oil Prices Climb over Escalating Tension in Middle East

Oil Prices Climb over Escalating Tension in Middle East

Prices of crude rose further on Wednesday as the market weighed diplomatic efforts in the Middle East against the broader impact of geopolitical tensions on oil supply, ANZ Bank said in a Wednesday note.

Brent crude jumped 1.7% to US$91.44 per barrel and West Texas Intermediate crude gained 2% to US$88.43 at last look early Wednesday. This comes after hundreds were killed in a blast at a Gaza hospital, escalating tensions in the region.

President Joe Biden is confirmed to be travelling to Israel this week amid efforts to prevent a regional outbreak of the Israel-Hamas war, which comes after a Middle Eastern tour by US Secretary of State Antony Blinken. However, the market remains on edge as Israel works on plans for a ground offensive into Gaza, the bank noted.

Oil prices were briefly under pressure after Russia’s central bank reiterated expectations that the Organization of the Petroleum Exporting Countries and allied producers may consider boosting output at the start of 2024.

However, Russian Deputy Prime Minister Alexander Novak later said it is too early to discuss OPEC+ market decisions to be made in November. Analysts believe oil would continue to rally as tensions grow following a hospital bombing in Gaza, which was followed by Jordan cancelling a summit with Arab leaders and President Biden

The oil market is trading firmer as fears grow over the conflict between Israel and Hamas. This is after a hospital bombing in Gaza, which killed hundreds. Hamas has blamed Israel for the bombing, while the Israelis have said it was militants.

Either way, this does little to contain the conflict. Jordan was scheduled to host a summit with Arab leaders and President Joe Biden today, however, this has been cancelled following the bombing.

API numbers released overnight will also be providing a bit of support to the market. US crude oil inventories fell by 4.38MMbbls, quite a bit more than the roughly 500Mbbls draw the market was expecting.

Cushing crude oil inventories are reported to have also fallen by around 1MMbbls, while for refined products, inventory declines were also seen with gasoline stocks decreasing by 1.58MMbbls and distillate stocks edging down by 612Mbbls.

Turning to the gas market, unions in Australia have called off strike action which was scheduled to start on Thursday at Chevron’s Gorgon and Wheatstone LNG facilities. #Naira Devaluation Deepens Economic Crisis in Nigeria

This is after members agreed to the latest labour deal with Chevron. Further potential strike action has been a risk lingering in the gas market with these two facilities making up around 6% of global LNG supply.

As for the calendar today, apart from the usual EIA weekly inventory report, there will be a data dump from China, which will include third-quarter GDP, September industrial production numbers and the second batch of trade data for September. The consensus for 3Q GDP growth is 4.5% year on year.

Oil prices saw limited gains on Tuesday amid the escalating conflict between Israel and Hamas and a tentative resolution to US sanctions on Venezuela.