By Georgina McCartney
HOUSTON (Reuters) -Oil prices soared on Thursday as concerns grew that a widening regional conflict in the Middle East could disrupt global crude flows.
futures closed down $3.72, or 5.03%, at $77.62 a barrel. U.S. West Texas Intermediate (WTI) crude futures rose $3.61, or 5.15%, to $73.71.
Brent futures hit an intraday high of $77.89 per barrel, while WTI futures peaked at $73.97 per barrel, both reaching one-month highs.
Market fears are growing over the possibility that Israel could target Iran’s oil infrastructure, which could provoke retaliation.
Asked Thursday whether he would support Israel in attacking Iran’s oil facilities, US President Joe Biden told reporters: “We are discussing that.” He added: “Nothing is going to happen today.”
The Pentagon said it was in talks with Israeli officials about their possible response to the Iranian missile attack, but declined to provide details.
“We’re certainly talking to them about their response, but I’m not going to speculate on what their response might be. But we will continue to talk to them,” said Pentagon spokesperson Sabrina Singh.
Iran is a member of the Organization of the Petroleum Exporting Countries with production of approximately 3.2 million barrels per day or 3% of global production.
“This is really going to test the market’s mettle because so far the risk to supply has been downplayed as there has been no disruption, so this could be a game changer,” said Phil Flynn, senior analyst at Price Futures Group. .
There are concerns that such an escalation could prompt Iran to block the Strait of Hormuz or attack Saudi infrastructure, as it did in 2019, said Panmure Gordon analyst Ashley Kelty.
The strait is a major logistics bottleneck through which a fifth of daily oil supplies pass.
“Our Q4 2024 estimates were $75/bbl prior to the recent headlines, but if these attacks materialize, prices could average closer to $78-$80/bbl,” StoneX analyst Alex Hodes said Thursday in a note.
Ministers from Gulf Arab states and Iran attended a meeting of Asian countries hosted by Qatar to discuss de-escalating hostilities between Israel and Iran, three sources told Reuters on Thursday.
Gulf Arab states sought to reassure Iran of their neutrality in the conflict amid concerns that further violence could threaten oil facilities in the Gulf, two sources said.
THE CONFLICT DEEPENS
The Israeli army on Thursday ordered residents of more than 20 towns in southern Lebanon to immediately evacuate their homes as the country continues its cross-border incursion and strikes Iranian-backed Hezbollah targets in a Beirut suburb.
Israeli Prime Minister Benjamin Netanyahu said Iran will pay for its missile attack on Israel on Tuesday, while Tehran said any retaliation would be met with “massive destruction”, fueling fears of a wider war.
“The intensifying conflict in the Middle East is raising major supply concerns in the global crude oil market,” Claudio Galimberti, chief economist at Rystad Energy, said in a note on Thursday.
“The likelihood of supply disruptions – especially but not exclusively from Iran – increases as the fighting intensifies,” he added.
National Oil Corp (NOC) has lifted force majeure on all Libyan oil fields and terminals, the state oil company said in a statement on its Facebook page (NASDAQ:), potentially ending a crisis that has sharply reduced oil production.
inventories rose 3.9 million barrels to 417 million barrels in the week ended September 27, the Energy Information Administration said on Wednesday, compared with Reuters expectations for a decline of 1.3 million barrels.
“Swelling US inventories are evidence that the market is well supplied and can withstand any disruptions,” ANZ analysts said in a note.
Fears have been tempered by OPEC’s spare oil production capacity and the fact that global crude supplies remain undisturbed by unrest in the region.
OPEC has sufficient spare capacity to compensate for a possible complete loss of Iranian supply.
