Oil prices rose on Thursday while the prospect of a broadening Middle East conflict that could disrupt crude flows from the main export region was overshadowed by a stronger global supply outlook.
Brent crude futures rose 94 cents, or 1.27%, to $74.84 a barrel by 0615 GMT. WTI oil futures rose 99 cents, or 1.41%, to $71.09.
Both indices had risen above $1 earlier in the session. Global markets have returned to some calm after initial tensions stemming from geopolitical risks in the Middle East, but of course, market participants remain skeptical of an impending Israeli response.
The question now is whether Iran’s energy infrastructure will be in Israel’s crosshairs.
Israel bombed central Beirut early on Thursday after its forces suffered their deadliest day on the Lebanese front in a year of fighting against the Iranian-backed armed group Hezbollah.
The attack came a day after Iran launched more than 180 ballistic missiles at Israel. It is now a waiting game to see what Israel’s response will be, will see likely after the Rosh Hashanah holiday ends tomorrow.
Israel’s targeting of Iranian oil infrastructure would likely push oil prices toward $80 a barrel, which would certainly not be welcomed by Israel’s allies, who are making progress against inflation.
Meanwhile, the Energy Information Administration (EIA) said U.S. crude inventories rose by 3.9 million barrels to 417 million barrels in the week ended Sept. 27. That was against analysts’ expectations for a 1.3 million barrel decline. The data provided evidence that the market is well supplied by swelling U.S. inventories and can withstand disruptions.
Some investors are unimpressed because global crude supplies have not yet been disrupted by unrest in the key producing region, and OPEC’s spare capacity has calmed concerns.
Prices may remain high or slightly more volatile after Iran’s attack, but there is enough production and sufficient supply in the world! OPEC+ has enough spare oil capacity to make up for the complete loss of Iranian supplies if Israel were to take that country offline.
However, traders are concerned that the producer group would be strained in the event of Iran attacking its Gulf neighbors. If there are further attacks on energy infrastructure in countries in the region, the spare capacity that can be effectively used could be much lower.
