Ahead of the OPEC+ meeting, the world commodity market sees an increase in oil prices, and Iran plans to retaliate for the killing of Ismail Haniyeh, the director of the political bureau for the Palestinian Hamas party. The market anticipates that the OPEC+ Joint Ministerial Monitoring Committee will not alter output policy at its meeting today.
Positive US demand expectations, bolstered by Energy Information Administration (EIA) inventory data, contributed to the oil market’s advance. Due to the possibility of more supply constraints due to geopolitical tensions in the Middle East, Brent saw a 0.7% increase to $81.44 per barrel.
At the same moment, the U.S. benchmark West Texas Intermediate (WTI) was trading at $78.33 a barrel, up 0.53% from the previous session’s closing price of $77.91 per barrel. According to statements released by Iran and Hamas on Wednesday morning, Haniyeh was murdered in an Israeli airstrike on his Tehran apartment the day after witnessing the inauguration of Iranian President Masoud Pezeshkian.
Prime Minister Benjamin Netanyahu has alluded to Tel Aviv’s role in Haniyeh’s assassination, despite Israel’s silence on his passing.
The EIA reported that there was a drop in crude stocks in the US, the world’s largest oil-consuming country. According to data released by the EIA late Wednesday, US commercial crude oil inventories decreased by 3.4 million barrels to 433 million barrels during the week ending July 26.
The drop in inventory was well above the market prediction of 1.6 million barrels. However, the rise of the US dollar against other currencies limited further price rises. A strong dollar ramped up prices for non-US currency holders and discouraged investors.
The US dollar index rose by 0.09% to 104.18 at 9.58 a.m. local time (0658 GMT), compared to the previous trading session.
Yesterday, oil prices rallied amid growing Middle East tensions. ICE Brent settled more than 3.5% higher on the day.
While Israel has not claimed responsibility for the assassination, Iran has said that it will retaliate as the assassination took place on Iranian soil.
The region and oil market will now be on tenterhooks to see how and if Iran retaliates, ING commodity strategists said in a note.
Iran’s new president had previously said that he would strive to normalise economic and international relations through the lifting of US sanctions.
If so, the Iranian regime might try to take a more measured response that does not jeopardise this aim, ING said. Either way, the market will likely need to price in a larger geopolitical risk premium until these tensions subside.
