Oil Prices Rise on Concerns of Middle East Conflict
Oil prices extend gains on geopolitical tensions
Oil prices continued to rise on Friday, increasing by approximately 1%, due to concerns that the Israel-Gaza conflict may spread throughout the Middle East, potentially disrupting supplies from one of the world’s top-producing regions.
Increased fears of conflict lead to price surge
Futures for oil climbed 0.8% to $93.15 a barrel, while U.S. West Texas Intermediate crude rose by 1.1% to $90.36 a barrel. Both contracts are on track for a second consecutive weekly gain as tensions escalate in the Middle East.
Tensions escalate with potential ground invasion
The recent explosion at a Gaza hospital and the anticipated ground invasion by Israeli troops have heightened fears of the conflict spreading in the region. This escalation could lead to higher oil prices, as the risk of supply disruption increases.
Analyst warns of potential price surge
IG analyst Tony Sycamore expressed concern over the situation, stating, “It’s quite scary, in fact. It looks like things could spiral out of control.” Sycamore believes that if WTI prices break resistance at $91.50, they could rise to a high last seen in late September at $95.03 a barrel.
Support from supply cuts and low inventories
Oil prices are also supported by forecasts of a widening deficit in the fourth quarter. Top producers Saudi Arabia and Russia have extended supply cuts until the end of the year, and low inventories, especially in the United States, contribute to the bullish sentiment.
U.S. plans to replenish emergency stockpile
The U.S. Department of Energy has announced plans to buy 6 million barrels of crude for delivery to the Strategic Petroleum Reserve in December and January. This move is part of the ongoing effort to replenish the emergency stockpile.
Lifting of oil sanctions on Venezuela unlikely to impact OPEC+
Despite the temporary lifting of U.S. oil sanctions on Venezuela, OPEC+ sources believe that no policy changes will be required by the producer group at this time. The recovery in Venezuelan oil production is expected to be gradual.
In conclusion, oil prices are surging amid geopolitical tensions in the Middle East. Escalating fears of the Israel-Gaza conflict spreading and potential supply disruptions have led to increased prices. Analysts warn of a possible further surge if resistance levels are broken. Additionally, supply cuts and low inventories contribute to the bullish sentiment. The U.S. plans to replenish its emergency stockpile, while the lifting of oil sanctions on Venezuela is not expected to impact OPEC+.
