Oil ticks higher ahead of Biden’s Israel trip as traders await pause on escalation of war; Brent at $90/bbl
- Concerns over the Israel-Hamas conflict drove big gains in both oil benchmarks last week. Global benchmark Brent gained 7.5 per cent in its largest weekly gain since February
Oil prices edged higher on Tuesday, October 17, ahead of a trip by US President Joe Biden to the Middle East that is likely to involve balancing support for Israel with trying to prevent any regional escalation of its war with Hamas. Biden's visit to Israel tomorrow will seek to balance showing support for Israel's war on Hamas and trying to rally Arab states to help prevent a regional conflict.
Following a drop of more than a dollar on Monday, Brent futures rose $0.74 to $90.39 a barrel, while US West Texas Intermediate (WTI) crude rose $0.69 to $87.35. Concerns over the Israel-Hamas conflict drove big gains in both oil benchmarks last week. Global benchmark Brent gained 7.5 per cent in its largest weekly gain since February, according to news agency Reuters.
Back home, on the Multi Commodity Exchange (MCX), crude oil futures due for a October 19 expiry, was last trading lower by 0.7 per cent at ₹7,188 per bbl, having swung between ₹7,132 and ₹7,528 per bbl during the session so far, against a previous close of ₹7,239 per barrel.
What's driving crude oil prices?
Iran pledged pre-emptive action from the ‘resistance front’ of its allies that include the Hezbollah movement in Lebanon, reported Reuters. Analysts say that oil prices are wavering as energy traders await to see if the US diplomatic efforts will be successful in preventing the Israel-Hamas conflict from turning into a wider regional war.
-Since 2019, the US has imposed sanctions on oil exports from Venezuela, a member of the Organization of Petroleum Exporting Countries (OPEC), to punish President Nicolas Maduro's government following elections in 2018 that US considered a sham.
-The US government has been seeking ways to increase the flow of oil to world markets to alleviate high prices. But any real oil output increase by Venezuela will take time because of a lack of investment.
-The CEO of Saudi Arabia's Saudi Aramco said on Tuesday the company could ramp up oil production within weeks if needed, as global consumption is set to reach a record level by year-end.
Where are prices headed?
Analysts noted that WTI crude oil futures eased at the start of the week, as the US intensified diplomatic efforts to contain the crisis in middle-east. US can’t squeeze Iranian and Russian oil at the same time, with significant political risk for Biden as he heads into the 2024 Presidential election.
‘’Oil prices were also under pressure amid reports that the US will ease sanctions on Venezuela’s oil exports in exchange for steps to ensure the country holds fair presidential elections next year,'' said Ravindra Rao, CMT, EPAT, VP-Head Commodity Research, Kotak Securities.
‘’Amid ongoing diplomatic efforts and reports of lifting Venezuelan sanctions, we expect oil prices to be under pressure for the day. Still, risks remain skewed to the upside and markets remain on the edge as Iran, which supports Hamas, has warned that an expansion of the war was ‘approaching the inevitable stage,’', added Rao.
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