Oil prices surge amid Middle East tensions

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MG News | August 01, 2024 at 03:51 PM GMT+05:00

August 01, 2024 (MLN): Oil prices climbed further on Thursday after surging almost 4% yesterday as geopolitical tensions heightened in the Middle East.

Brent crude rose towards $81.39 per barrel after gaining 3.8% on Wednesday.

While West Texas Intermediate crude (WTI) was at $78.43 per barrel after posting its biggest daily gain since October.

Iran’s Ayatollah Ali Khamenei ordered a direct strike on Israel, the New York Times reported.

That comes after Iran said Israel assassinated the political leader of Hamas in Tehran, shortly after killing a senior member of Hezbollah in Beirut, Bloomberg reported.

As with other periods of geopolitical turmoil in recent months, there’s been a flurry of activity in the oil options market.

Call volumes were the highest since April on Wednesday, while traders are now paying a rare premium for those contracts over bearish ones.

Meanwhile, US officials are still pushing for a cease-fire in Gaza but concede it’s harder than ever after the death of Hamas’ political leader Ismail Haniyeh — a key representative during the negotiations.

The escalation comes before a review meeting by key members of the Organization of the Petroleum Exporting Countries and its allies.

Delegates expect the group’s session later Thursday to be routine, making no changes to plans to restore production starting in the fourth quarter.

“The biggest determinant of where prices might go is a combination of geopolitics, but critically OPEC’s decision in the coming weeks around the pace at which it unwinds its cuts, and of course the Chinese demand,” Wael Sawan, Chief Executive Officer of Shell Plc said in a Bloomberg TV interview. “At the moment we see that the physical markets are well balanced, if anything slightly tight.”

Crude is still higher this year despite logging a monthly decline in July as concern increased over demand from top importer China, with data Thursday showing a suprise contraction in manufacturing.

Bullishness has been driven by tensions in the Middle East, OPEC+ curbs and expectations that monetary easing would boost US demand.

Federal Reserve Chair Jerome Powell said Wednesday that an interest-rate cut could come as soon as September.

Separately, US crude inventories shrank by 3.4 million barrels last week, government data showed.

The fifth weekly decline in stockpiles was the longest streak of declines since January 2022. Levels at the Cushing hub also fell.

Copyright Mettis Link News

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