By Adedapo Adesanya
Oil prices rose by 1 per cent on Thursday as tensions surged over fears that Israel’s military campaign in Gaza could escalate to a regional conflict.
The price of Brent crude increased during the trading session by 1 per cent or 88 cents to sell at $92.38 a barrel and the US West Texas Intermediate (WTI) crude futures jumped by 1.2 per cent or $1.05 to close at $89.37 a barrel.
Reuters reported that Israel’s Defence Minister, Mr Yoav Gallant, told troops gathered at the Gaza border that they would soon see the Palestinian enclave “from inside”. This suggested an expected ground invasion with the aim of annihilating Hamas.
The country is being forced to divert crude oil imports from its main Mediterranean terminal due to the escalating Gaza conflict, with Bloomberg reporting that an oil tanker is currently heading toward the country’s Red Sea port to avoid becoming a target in the conflict.
A 900-foot vessel carrying over 1 million barrels of crude oil from Azerbaijan is being masked as an import intended to dock in Aqaba, Jordan, while its true destination is Israel.
The reported redirection of oil cargo to a rarely used Red Sea port follows Iran’s call earlier this week for Islamic countries to impose an oil embargo on Israel.
While that call resulted in a brief oil price rally, a statement from the Organisation of the Petroleum Exporting Countries (OPEC) to the effect said that there are no plans to implement such an embargo. This cooled markets somewhat.
On Tuesday, the secretary-general of the Gulf Cooperation Council (GCC), which represents Saudi Arabia, the UAE, Kuwait, Qatar, Bahrain, and Oman, said the group would continue to foster energy security and avoid using oil as a weapon.
The market also found support after US Federal Reserve Chair, Mr Jerome Powell, said the US central bank would be proceeding carefully on future interest rate hikes, which could slow the economy and dent fuel demand.
Gains were limited after the US issued a six-month license authorising transactions in the energy sector of OPEC member Venezuela, whose government reached an agreement with the political opposition there to ensure fair 2024 elections.
The deal is not expected to quickly expand Venezuela’s oil output but could return some foreign companies to its oilfields and provide more cash-paying customers for its crude.
Easing of US oil sanctions on Venezuela is unlikely to require any policy changes by the OPEC+ producer group for now as a recovery in production is likely to be gradual.
US crude oil and fuel inventories dropped last week on rising demand for diesel and heating oil, according to data from the Energy Information Administration (EIA). Distillate fuel stockpiles fell by 3.2 million barrels in the week to October 13 to 113.8 million barrels and crude inventories fell by 4.5 million barrels to 419.7 million barrels, while gasoline fell by 2.4 million barrels to 223.3 million barrels.
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