Written by Georgina McCartney
HOUSTON (Reuters) – Oil prices rose on Thursday as concerns grew that the ongoing conflict in the Middle East region could disrupt crude oil flows around the world.
Futures were up $3.72, or 5.03%, at $77.62 a barrel. US West Texas Intermediate (WTI) crude futures added $3.61, or 5.15%, to $73.71.
Brent futures hit an intraday high of $77.89 per barrel, while WTI futures hit $73.97 per barrel, both hitting one-month highs.
Market fears are rising because Israel may target Iran's oil infrastructure, which could trigger retaliation.
Asked on Thursday whether he would support Israel striking oil facilities in Iran, US President Joe Biden told reporters that “we are discussing that.” He added: “Nothing will happen today.”
The Pentagon said it was in discussions with Israeli officials about their response to the Iranian missile attack but declined to provide details.
“Of course we are talking to them about their response, but what their response will be, I will not continue to speculate. But we are continuing to communicate with them,” said Pentagon spokeswoman Sabrina Singh.
Iran is a member of the Organization of the Petroleum Exporting Countries with a production of about 3.2 million barrels per day or 3% of global production.
“This will really test the market rate because until now the risk of delivery has been reduced, as there have been no disruptions, so this could be a game changer,” said Phil Flynn, senior analyst at Price Futures Group. .
There are concerns that such an 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 major oil outlet through which a fifth of the daily oil passes.
“Our estimates for Q4 2024 were $75/bbl before the latest headline, but if this attack comes through prices could reach levels closer to $78-$80/bbl,” StoneX analyst Alex Hodes said in a note on Thursday.
Ministers from the Gulf Arab countries and Iran attended an Asian summit hosted by Qatar to discuss the ongoing conflict between Israel and Iran, three sources told Reuters on Thursday.
Gulf Arab states sought to reassure Iran of their neutrality in the conflict over concerns that further violence could threaten Gulf oil facilities, two sources said.
CONFLICT IS CONFLICT
The Israeli military told residents of more than 20 towns in southern Lebanon to evacuate their homes immediately on Thursday as they continued to raid the border and attack Iran-backed Hezbollah in the suburbs of Beirut.
Israeli Prime Minister Benjamin Netanyahu said Iran would pay for its missile attack on Israel on Tuesday and Tehran said any retaliation would be met with “massive destruction,” raising fears of a wider war.
“The growing conflict in the Middle East is causing serious concern for the global market,” Rystad Energy's chief economist, Claudio Galimberti, said in a note on Thursday.
“The possibility of supply disruptions – especially, but not only in Iran – increases as the war escalates,” he added.
The National Oil Corp (NOC) has lifted maximum capacity at all oil fields and ports in Libya, the country's oil company said in a statement on its Facebook page (NASDAQ: ), potentially ending a crisis that has severely reduced oil output.
Inventories rose by 3.9 million barrels to 417 million barrels in the week ended Sept. 27, the Energy Information Administration said on Wednesday, compared with expectations in a Reuters poll for a decline of 1.3 million barrels.
“The glut in US supplies added evidence that the market is well supplied and can withstand any disruption,” ANZ analysts said in a note.
Fears have been eased by OPEC's oil output capacity and the fact that global crude supplies will still be disrupted by unrest in the region.
OPEC has enough spare capacity to compensate for a potential total loss of Iranian supply.
