As supply worries are raised by the Israel-Hamas conflict, oil increases 3% to a one-week high; Brent closes at $90/bbl

 As supply worries are raised by the Israel-Hamas conflict, oil increases 3% to a one-week high; Brent closes at $90/bbl

Concerns over the possibility that hostilities between Israel and Gaza may escalate into a larger battle that would impair the world's supply of crude oil caused oil prices to rise by almost 3% to a one-week high during the previous session. Following US military strikes on Iranian targets in Syria early in the day, oil prices surged by more than $2 per barrel. The price of the mediation discussions between Israel and the violent Hamas organization, which were facilitated by Qatar in cooperation with the US, momentarily dropped.

US West Texas Intermediate (WTI) crude increased $2.33, or 2.8 percent, to close at $85.54, while Brent futures jumped $2.55, or 2.9 percent, to settle at $90.48 a barrel. According to sources, the oil companies found it more appealing to deploy ships to the US to pick up petroleum for export when Brent's premium over WTI reached its greatest level since March.

WTI Crude oil futures fell more than 2% on Thursday due to indications of waning US demand, a strong currency, and a little reduction in tensions in the Middle East. A portion of the war premium was deflated by ongoing diplomatic attempts to postpone an anticipated ground invasion of Gaza by Israeli soldiers.

According to news agency Reuters, WTI was down around 4% and Brent was down roughly 2% for the week. At home, the Multi Commodity Exchange (MCX) saw a 2.99 percent increase in the closing price of crude oil futures scheduled for November 17 expiration. During the session, the price of the barrel fluctuated between ₹6,932 and ₹7,154, with a previous close of ₹6,945 per barrel.

What influences the price of crude oil?

.Israeli ground and aerial troops increased their activity in the Gaza Strip in response to reports of intense bombardment of the confined area. Many nations, including many Arab governments, have pleaded with Israel to postpone its intended ground invasion, which would result in a large number of civilian fatalities and perhaps spark a broader confrontation.

Although events in the Middle East have not yet directly impacted the world's oil supply, many are concerned that major oil producer and Hamas supporter Iran and other countries may stop exporting their petroleum.

-Goldman Sachs analysts maintained their $95 per barrel Brent oil price prediction for the first quarter of 2024, but they also mentioned that a 5% increase in base pricing may result from reduced Iranian shipments.

-US consumer spending increased sharply in September of 2023 but seemed to be leveling out in early 2024. According to some experts, the US Federal Reserve is finished hiking interest rates to combat inflation, which may impede economic expansion and lower demand for oil.

Which way are prices going?

A gloomy forecast for Euro-zone GDP and the strong performance of the dollar index caused a decrease in crude oil prices. According to Rahul Kalantri, VP of Commodities at Mehta Equities, "the dollar index has remained above 106 as well as US 10-year bond yields are currently at 16-year highs, a development that has curbed the improvements in global commodity prices."

Notably, US third-quarter GDP data that was higher than expected helped to keep crude oil prices at a lower level. "We anticipate more volatility in crude oil prices this coming week, which is driven by changes in the dollar index and ongoing tensions in the Middle East," concluded Kalantri.

"Markets remain on the northernmost point as US military forces conducted defend themselves strikes on two facilities in eastern Syria, a weapon of mass destruction is reported to have struck an Egyptian border town, and Iranian FM is regularly threatening of a wider conflict in the Middle East," stated Ravindra Rao, CMT, EPAT, VP - Head Commodity Research, Kotak Securities. We anticipate a continued cushioning of oil prices.