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Oil prices jump as fears of Iran-Israel escalation stokes Middle East tensions

Published 04/03/2024, 09:41 PM
Updated 04/04/2024, 03:40 PM
© Reuters.
- Oil prices settled higher Thursday, as the threat of potential supply disruptions continue to dominate investor attention as geopolitical tensions in the Middle East flare amid fears an Iran retaliatory strikes against Isreal could be imminent.     

At 14:30 ET (18:30 GMT), West Texas Intermediate crude futures rose 1.4% to $86.59 a barrel, while Brent oil futures expiring in June rose 1.5% to $90.65 a barrel, both having previously climbed to their highest levels since October.

"Brent is facing some resistance at the US$90/bbl level, with it unable to break above it so far," ING analysts said, in a note.

Geopolitical tensions rise on fears of imminent Iran attack 

Israel Security Cabinet met Thursday on concerns that an Iranian response to Israel's alleged attack on its diplomatic consulate in the Syrian capital, Damascus could be imminent.

Netanyahu said Thursday that Israel would harm "whoever harms us or plans to harm us," adding that Israel was acting against Iran both defensively and offensively following years of Iran attacks directly and via proxies against Israel.
The fresh rise in geopolitical tensions in the Middle East continue to support bets on potential disruptions to oil supplies. 

The threat, which would broaden the conflict in the oil-rich region, also came as the Israel-Hamas war showed little signs of de-escalating, as a slew of recent ceasefire proposals fell through.

On the Russia-Ukraine front, attacks on key Russian refineries heralded more supply disruptions for Moscow. Several Russian oil and fuel refineries either cut production or were taken out of commission in the wake of Ukrainian drone strikes. 

At the same time, the Organization of Petroleum Exporting Countries and allies voted to maintain its current band of production cuts on Wednesday, presenting a tight outlook for crude in the near-term. 

Improving Chinese economy aids demand outlook

Crude prices were also cheered by improving economic conditions in top importer China, following a string of positive purchasing managers index readings for March.

Chinese manufacturing activity rose back into expansionary territory, while service sector growth also improved.

But the world’s largest oil importer still has a long road ahead in shoring up its economy, especially as it still grapples with the aftermath of the COVID-19 pandemic. 

Mixed US inventories cap oil gains 

Crude was held back by mixed readings on U.S. inventories, especially as official data showed an unexpected build in overall crude stockpiles

The build came as U.S. production remained near record highs- a trend that is expected to somewhat offset a tight outlook for oil markets.

But U.S. fuel demand was also seen rebounding from winter lows, with gasoline inventories seeing a bigger-than-expected draw in the past week. The trend pointed to robust demand in the world’s largest fuel consumer. 

(Ambar Warrick contributed to this article.)

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