Energy
Wednesday, October 2nd, 2024 4:24 pm EDT
Key Points
- U.S. crude oil prices rose over 1% on Wednesday, influenced by geopolitical tensions in the Middle East, but faced downward pressure from a bearish U.S. inventory build, which saw stockpiles increase by 3.9 million barrels last week.
- The prices for West Texas Intermediate (WTI) crude reached $70.22 per barrel and Brent crude reached $74.04 per barrel, although both benchmarks have declined year-to-date, with WTI down about 2% and Brent down nearly 4%.
- Analysts highlight that despite escalating tensions, such as threats from Israel against Iran following missile attacks, the geopolitical risk premium on oil prices remains moderate due to high global spare capacity and limited production disruptions, with OPEC+ planning to increase production and weak demand from China.
U.S. crude oil prices experienced an increase of more than 1% on Wednesday, although they retreated from earlier session highs due to a bearish U.S. inventory build. According to the Energy Information Administration, U.S. oil stockpiles rose by 3.9 million barrels last week, alongside a 1.1 million barrel increase in gasoline inventories. This inventory data presents a bearish outlook, especially considering the prevailing geopolitical tensions that have been pushing prices higher. Matt Smith, lead oil analyst for Kpler, emphasized the contrasting nature of these inventory levels against the current geopolitical backdrop.
Earlier in the day, U.S. crude saw a nearly 4% rise as traders reacted to fears that Israel might target Iran’s oil infrastructure in response to a ballistic missile attack from Iran. The West Texas Intermediate (WTI) for November delivery reached $70.22 per barrel, reflecting a 46-cent increase, or 0.66%, while Brent crude for December delivery was priced at $74.04 per barrel, up 47 cents or 0.64%. Despite the recent uptick, both U.S. crude and Brent have experienced year-to-date declines of approximately 2% and nearly 4%, respectively. Additionally, RBOB gasoline prices rose to $1.9741 per gallon, a 0.38% increase, while natural gas rose to $2.90 per thousand cubic feet, reflecting a more than 15% increase year-to-date.
The escalating tensions in the Middle East are underscored by remarks from Israel’s ambassador to the United Nations, Danny Danon, who warned of a “painful” response to Iran following its launch of around 180 ballistic missiles targeting Israel, a retaliation for the assassination of key Hamas and Hezbollah leaders. Analysts from Piper Sandler noted that the next phase of retaliation could potentially involve oil, suggesting that Israel may attempt to weaken Iran’s oil capacity or that Iran’s proxies might target oil and gas shipping routes in the Persian Gulf.
Despite the geopolitical risks, analysts like Goldman Sachs’ Yulia Zhestkova Grigsby believe that the geopolitical risk premium for oil should remain moderate, citing high global spare oil capacity and the absence of significant production disruptions. Additionally, OPEC+ plans to increase oil production in December, while U.S. output has been setting records, and demand from China, the world’s largest crude importer, has been lackluster this year. This combination of factors indicates a complex interplay between geopolitical tensions and market fundamentals, influencing crude oil pricing and trading strategies in the current landscape.
For the full original article on CNBC, please click here: https://www.cnbc.com/2024/10/02/crude-oil-jumps-nearly-3percent-as-israel-vows-painful-response-to-iran-missile-attack.html
