After stabilisation, the weekly increase in oil prices was 8%
4 October 2024 10:45
The global oil market is experiencing significant fluctuations amid rising tensions between Israel and Iran. As of 4 October, oil prices have stabilised after the biggest one-day jump in almost a year, but remain on track for the biggest weekly rise since early 2023. This is stated in the material of Bloomberg, according to "Komersant Ukrainian"
The main reason for the market instability was fears of a possible Israeli strike on Iranian oil facilities in response to a recent missile attack. US President Joe Biden said that the United States was in talks with Israel about potential support for such attacks on Iran’s energy infrastructure. However, a US official later clarified that the administration is still in consultation and believes that a final decision has not yet been made.
Against this backdrop, the price of Brent crude, which is the global benchmark, is trading just below $78 per barrel, having shown a 5% increase on Thursday alone. West Texas Intermediate (WTI) is also showing significant growth, trading just below $74 per barrel. Over the week, oil prices rose by about 8%, the largest weekly increase since the beginning of last year.
Market experts are concerned about the possible consequences of the escalating conflict in the Middle East. Vishnu Varathan, head of Asia economics and strategy at Mizuho Bank Ltd. in Singapore, said:
“There are fears that Israel will target Iran’s oil production facilities to hit Iran where it hurts the most – its pocketbook.”
He also adds that although prices have risen sharply, oil has probably not yet fully priced in a full-scale war scenario.
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It is important to note that the Middle East provides about a third of the world’s oil supply. Iran, in particular, is the third largest producer in the Organisation of the Petroleum Exporting Countries (OPEC), producing about 3.3 million barrels of oil per day. According to Citigroup Inc. estimates, a large-scale Israeli strike on Iran’s export capacity could take up to 1.5 million barrels of daily supply off the market.
An additional risk factor is the possibility that Iran could retaliate with strikes on the energy infrastructure of neighbouring countries or disrupt supplies through the strategically important Strait of Hormuz. Analysts at Clearview Energy Partners warn that disruption of flows through this narrow strait could lead to a further rise in oil prices by $13-28 per barrel.
However, not all experts agree with the pessimistic forecasts. Analysts from ANZ Group Holdings consider an Israeli attack on Iran’s oil facilities to be the “least likely” option, arguing that such a move could cause dissatisfaction among Israel’s partners, including the United States, and potentially provoke a more serious response from Tehran.
Against the backdrop of geopolitical tensions, market indicators are also sounding alarm bells. The options markets show that investors are betting on a further rise in oil prices. Brent call options, which are profitable when prices rise, have reached their highest premium level in a year compared to put options.
Despite the current volatility, there are other factors affecting the oil market. The OPEC alliance has confirmed its plan to start restoring some of the suspended capacity in December, and Libya has begun to resume production after the internal political confrontation eased. In addition, there are signs that underlying conditions remain weak in the physical market.
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