Houston — Oil prices strengthened on Thursday on investor concern that a widening Middle East conflict could pose a threat to crude oil flows from the region.
Brent crude futures were up $2.82, or 3.82%, at $76.72 a barrel and US West Texas Intermediate (WTI) crude futures rose $2.85, or 4.07%, to $72.95 before midday.
Both benchmarks climbed by more than $3 per barrel during the session. Brent futures reached an intraday high of $77.65 per barrel, the strongest since August 30, while WTI futures peaked at $73.95 per barrel, a one-month high.
Market fears are mounting over the possibility that Israel might target Iranian oil infrastructure, raising the spectre of retaliation from Iran. On Thursday, US President Joe Biden said the US was discussing possible strikes by Israel on Iran’s oil industry.
Asked if he would support Israel striking Iran’s oil facilities, Biden said: “We’re discussing that.”
“This is going to really test the mettle of the market because up until now the risk to supply has been downplayed, as there has been no disruption, so this could be a game changer,” said Phil Flynn, senior analyst for Price Futures Group.
“It is raising a lot of bullish questions. The market has got to buckle up its seat belts and get ready for some volatility,” he added.
There were concerns that such escalation could prompt Iran to block the Strait of Hormuz or attack Saudi infrastructure, as it did in 2019, said Panmure Gordon analyst Ashley Kelty.
The strait is a key logistical chokepoint through which a fifth of daily oil supply passes.
Ministers from Gulf Arab states and Iran attended a meeting of Asian nations hosted by Qatar to discuss de-escalating hostilities between Israel and Iran, three sources told Reuters on Thursday.
The Gulf Arab states sought to reassure Iran of their neutrality in the conflict on concerns that further violence could threaten Gulf oil facilities, two of the sources said.
Conflict deepens
Israel bombed Beirut early on Thursday, killing at least six people, after its forces suffered their deadliest day on the Lebanese front in a year of clashes with Iran-backed Hezbollah.
Israeli Prime Minister Benjamin Netanyahu said Iran would pay for its missile attack against Israel on Tuesday while Tehran said that any retaliation would be met with “vast destruction”, stoking fears of a wider war.
“The intensifying conflict in the Middle East is generating significant supply concern in the global crude market,” Rystad Energy’s chief economist, Claudio Galimberti, said in a note on Thursday.
“The potential for supply disruptions — particularly, but not exclusively from Iran — increases as the fighting intensifies,” he added.
Curbing oil gains on Thursday, the National Oil Corporation (NOC) lifted the force majeure at all Libyan oilfields and terminals, the state oil company said in a statement on its Facebook page, potentially ending a crisis that has heavily reduced oil output.
Meanwhile, US crude inventories rose by 3.9-million barrels to 417-million barrels in the week ended September 27, the Energy Information Administration said on Wednesday, compared with expectations of a 1.3-million barrel decline.
“Swelling US inventories added evidence that the market is well supplied and can withstand any disruptions,” ANZ analysts said in a note.
Update: October 3 2024
This story has been updated with new information.
Reuters
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