Oil Market Rises on Middle East Conflict Worries

By Adedapo Adesanya 

The oil market soared on Monday over fears that a widening conflict in the Middle East could curtail Iranian crude supply.

The price of Brent crude futures went up by 38 cents to $71.92 per barrel during the session and the US West Texas Intermediate (WTI) futures increased by 30 cents to $68.48 a barrel.

After a tumultuous month, Brent recorded about a 9 per cent month-on-month loss, which would be its biggest decline since November 2022 while the WTI declined 7 per cent, its highest since the end of August.

Since it was the final trade for the third quarter, Brent made an 18 per cent loss while the US WTI recorded a 16 per cent loss for the quarter.

Prices were supported by the possibility that Iran, a key producer and member of the Organisation of the Petroleum Exporting Countries (OPEC), may be directly drawn into a widening Middle East conflict.

Since last week, Israel has escalated attacks, conducting strikes which have killed Hezbollah and Hamas leaders in Lebanon and hit Houthi targets in Yemen.

The three groups are backed by Iran, and this has raised worries that Iran may want to hit back and spark a wider issue for the Middle East.

The market has not reacted strongly to China’s fiscal stimulus measures, which analysts expected will help in the world’s second-biggest economy and top oil importer.

Traders question whether the measures will be enough to boost China’s weaker-than-expected demand so far this year.

Data showed that China’s manufacturing activity shrank for a fifth straight month and the services sector slowed sharply in September.

Meanwhile, following last week’s deal on the leadership of the Central Bank, Libya is set to resume crude oil production on October 1. This development also weighed on the market.

Crude production at most Libyan oilfields has been suspended for over a month after the country’s eastern and western administrations clashed over who should be governor of the Central Bank of Libya.

At the end of last week, the rival factions reached an agreement in UN-mediated talks over the election of the Central Bank’s leadership, paving the way to restoring oil production and exports.

Estimates showed that crude oil exports from Libya crumbled to around 400,000 barrels per day in September from 1 million barrels per day in August.