Benchmark Brent oil hit US$93 a barrel on Wednesday 18/10 as the risk of escalating conflict in the Middle East threatened to disrupt the region’s oil supply, with Iran calling for an oil embargo on Israel.
Brent oil futures rose $2.54, or 2.8 per cent, to $92.44 a barrel by 10:56 GMT. West Texas Intermediate (WTI) oil futures were up $2.54, or 2.9 per cent, to $89.2 a barrel.
Both benchmarks gained more than $3 to reach their highest levels in a fortnight at the start of the session.
The markets took account of risk premiums after hundreds of Palestinians were killed in an explosion in a Gaza City hospital on Tuesday 17 October, which the Israeli and Palestinian authorities blamed on each other.
Jordan then cancelled a summit it was due to host with US President Joe Biden and the Egyptian and Palestinian leaders. Biden arrived in Israel on Wednesday 18 October pledging solidarity in its war against Hamas and backing his version that the explosion in the Gaza hospital was caused by militants.
“This diplomatic U-turn once again raises fears of the conflict spreading and therefore oil jumping,” said John Evans of oil broker PVM.
In Jeddah, Saudi Arabia, Iranian Foreign Minister Hossein Amirabdollahian called on the members of the Organisation of Islamic Cooperation to impose an oil embargo on Israel.
OPEC+ does not intend to take any immediate action on Iran’s appeal, two sources in the producer group told Reuters.
“A prolonged occupation emerges as the scenario that pushes Brent oil futures above $100/bbl, because it increases the risk that the conflict between Israel and Hamas expands and potentially draws Iran in directly,” added Vivek Dhar, an analyst at Commonwealth Bank of Australia.
In addition to geopolitical tensions, other factors are also supporting oil prices.
US crude oil inventories fell much more than expected by 4.4 million barrels in the week ended 13 October, compared to a forecast of a 300,000 barrel drop, according to market sources citing data from the American Petroleum Institute on Tuesday 17 October.
Official US government data will be released later on Wednesday 18 October.
On the demand side, China’s economy grew faster than expected in the third quarter, official data showed on Wednesday 18 October, suggesting that a recent flurry of policy measures is helping to bolster a tentative recovery.
The data also showed that the country’s oil refinery throughput in September reached a record daily rate, up 12 per cent from a year earlier, as refineries raised operating rates to meet strong demand for transport fuel during the Golden Week holiday and improving industrial activity.
But analysts were cautious about the Chinese economy, with the country’s property sector still in danger.
“The economic recovery is still in its infancy,” said Harry Murphy Cruise, economist at Moody’s Analytics.
Meanwhile, higher than expected US retail sales in September boosted expectations of a further rise in interest rates by the end of the year. Raising interest rates to curb inflation could slow economic growth and reduce demand for oil.
O.Económico
