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Oil surges nearly 6% after Israel begins ground raids into Gaza

Published 10/12/2023, 10:59 PM
Updated 10/13/2023, 03:50 PM
© Reuters. FILE PHOTO: Crude oil storage tanks are seen in an aerial photograph at the Cushing oil hub in Cushing, Oklahoma, U.S. April 21, 2020. REUTERS/Drone Base/File Photo

By Stephanie Kelly

NEW YORK (Reuters) -Oil prices leapt nearly 6% on Friday, with Brent posting its highest weekly gain since February, as investors priced in the possibility that the conflict in the Middle East could widen as Israel began ground raids inside the Gaza Strip.

Israel's announcement marked a shift from an air war to ground operations to root out Hamas fighters a week after the militant Palestinian group's deadly rampage in southern Israel.

Brent futures settled up $4.89, or 5.7%, at $90.89 per barrel. U.S. West Texas Intermediate (WTI) crude gained $4.78, or 5.8%, to $87.69 a barrel.

Both benchmarks posted their highest daily percentage gains since April.

Brent also recorded a weekly gain of 7.5%, its biggest such increase since February. WTI climbed 5.9% for the week.

The conflict in the Middle East has had little impact on global oil and gas supplies, and Israel is not a big producer. Investors and market observers, however, are assessing how it could escalate and what it might mean for supplies from nearby countries in the world's top oil producing region.

Some residents in Gaza were abandoning their homes on Friday to escape from the path of an Israeli onslaught, after Israel ordered more than a million people to leave the northern half of the territory within 24 hours. Hamas told them not to go.

Iran's Oil Minister Javad Owji said on Friday oil prices are expected to reach $100 per barrel due to the current situation in the Middle East, according to the ministry's news agency SHANA.

Iran's Foreign Minister Hossein Amirabdollahian on Friday discussed the Israeli-Hamas conflict with the head of the powerful Tehran-backed Lebanese armed group Hezbollah, which has launched its own cross-border attacks on Israel.

If the U.S. tightens enforcement of sanctions on Iran's oil exports due to any role it may have in the conflict, then Iran's oil supply could fall.

Saudi Arabia is putting U.S.-backed plans to normalize ties with Israel on ice, two sources familiar with Riyadh's thinking said, signalling a rapid rethinking of its foreign policy priorities as the conflict escalates.

That may have implications for supply as Saudi Arabia told the White House it was willing to boost oil production early next year to help secure the deal, the Wall Street Journal reported last week.

Also boosting prices was the U.S. move on Thursday to impose the first sanctions on owners of tankers carrying Russian oil priced above the Group of Seven's price cap of $60 a barrel, an effort to close loopholes in the mechanism designed to punish Moscow for its invasion of Ukraine.

Russia is the world's second-largest oil producer and a major exporter, and the tighter U.S. scrutiny of its shipments could curtail supply.

"The oil market is anticipating that the U.S. will more strictly enforce sanctions on both Russia and Iran, and that will lead to a reduction in supplies," said Andrew Lipow, president of Lipow Oil Associates.

The Organization of the Petroleum Exporting Countries (OPEC) this week kept its forecast for growth in global oil demand, citing signs of a resilient world economy so far this year and expected further demand gains in China, the world's biggest oil importer.

© Reuters. FILE PHOTO: Crude oil storage tanks are seen in an aerial photograph at the Cushing oil hub in Cushing, Oklahoma, U.S. April 21, 2020. REUTERS/Drone Base/File Photo

On the U.S. supply front, drillers this week added four oil rigs in the biggest weekly rise since March, Baker Hughes said. [RIG/U]

Money managers cut their net long U.S. crude futures and options positions in the week to Oct. 10 by 39,556 contracts to 240,204 during the period, the U.S. Commodity Futures Trading Commission (CFTC) said.

Latest comments

I prefer crypto currencies to oil because weekly I earn pretty good profits on the platform I invest on
Which platform?
IDF : Going to visit Hamas ?? (NOT a good idea.)
Screw the oil. I'm use to paying $7.00 a gallon anyway.  I sure hope they make a Movie about the Gaza War soon. A good Movie title should be "Gaza Pay Back" or "Hamas This!". The Tunnels in Gaza could be easily cleared by Flame Throwers. After they emerge burning, just let them burn. Saw how the Marines did this in the movie "Pacific". Quite effective. Anyway, gotta go water my plants. Talk to everyone later. Charles.
The oil price was too low anyway, and today’s surge Jett makes it a bit less undervalued. Of course, there is no connection between Israel and oil price, while Reuters-investing posts mainly propaganda on the issues.
'warm camp' clueless as always...and the irony of you blaming others of posting propaganda.. projecting seems to be a common trait amongst you maga-cultists...
It's not just Reuters on this site/app.
Israel is not a major producer of oil. just another opportunity for the oil traders to make a Buck.
Iran is and you are clueless.
 and your a bottom boy too. Go back to your she shed.
 Anything surrounding Iran at this point is speculation, nothing has happened and most likely won't
How can US bring down prices if keep banning and sanction ridiculous cap prices? So biden admins only think for their own corruptions. Whole world are suffering now. F u biden admins, Ukraine, Israel !
But it could be about working with US oil companies to produce and refine more clean, energy efficient oils within our own borders.
Pop quiz: How many new oil leases have been permitted under Biden?
Beuller? Beuller?
"Supply side issues remained the focus" yeah it's in your focus, that's why you ignore new record 13.2mln  in the U.S. oil production.
You Believe Everything The Government Tells You??? 😳 🤣🤣🤣
Have any idea what our daily requirement is? Also, we produce light, sweet crude, our refineries are built for the heavy crude. that's why we export most of ours and import what we need.
"above the G7's price cap of $60 a barrel" so it should fall sharply. Commoditiy parasites pretend not to understand it
the entire inflation issue is because usa banning russian oil. and they keep sanctioning again. cant they cut down on oil taxes in usa to bring down oil prices and inflation? this inflation drama keeps on going for years
The whole EU and US facing heavy inflation. can you have inflation in control with oil rallies...?
Prices just moving on assumption basis. there is no actual demand. Saudi has assured full supply.
What about perma bear Biden WH spokeman Kilduff?
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