Oil prices saw a steady climb on Friday, driven by reports of possible military action by Iran against Israel from Iraqi territory. This surge reflects heightened global tension as geopolitical conflicts raise supply risk concerns, despite a drop in global demand due to China’s reduced oil imports.
Brent crude rose 0.55% to $74.43 per barrel, while the U.S. benchmark, West Texas Intermediate (WTI) crude, climbed to $71.30. Reports suggest that Iran could launch an attack before the upcoming U.S. presidential election on November 5, according to sources from Axios and Reuters, which cited anonymous Israeli officials.
Market analysts also attribute the upward price movement to expectations that the Organization of Petroleum Exporting Countries (OPEC) and its allies may delay a planned production increase scheduled for December. Four industry sources reported to Reuters that OPEC might adjust its output strategy due to weaker demand and increasing oil supplies, a decision expected to be finalised next week.
In the U.S., a notable rise in commercial crude oil stocks is projected, with an anticipated increase of 6.7 million barrels in the coming report, according to Macquarie analysts. They noted a nominal supply drop by 0.3 million barrels per day (b/d), while net imports surged by 1.4 million b/d, alongside an increase of 1.1 million barrels in the Strategic Petroleum Reserve. Concurrently, gasoline and distillate inventories are forecasted to drop by 2.1 million and 3.2 million barrels, respectively, with jet fuel stocks likely to rise by 0.4 million barrels.
In the Middle East, escalated attacks by Israeli forces on Gaza and Beirut have added to concerns over oil supply disruptions, particularly as Israeli Prime Minister Benjamin Netanyahu stated that military actions will continue until Israel achieves its objectives. The conflict’s potential impact on maritime trade routes, particularly the Red Sea, has intensified fears of a global oil supply chain disruption.
Iran-aligned Houthi forces in Yemen have reportedly escalated actions against commercial ships affiliated with Israeli interests off Yemen’s coast. Since October 31, the Houthis have attacked vessels with drones and missiles in response to Israel’s Gaza offensives. The Houthis also claim responsibility for targeting over 200 ships associated with Israel, the U.S., and the UK in recent days, leading several shipping companies to avoid Red Sea routes altogether.
This turbulent environment has left global oil markets on edge, as industry watchers and consumers await potential shifts in OPEC’s production policies and further developments in the Middle Eastern conflict.
