Oil Prices Rise Amid Expected Iran Attack on Israel

By Adedapo Adesanya

Oil prices settled higher on Tuesday, breaking a three-session declining streak as investor attention turned to supply tightness as the market braces for an attack by Iran against Israel

Brent crude futures rose by 18 cents or 0.2 per cent to settle at $76.48 a barrel and the US West Texas Intermediate (WTI) futures gained 26 cents or 0.4 per cent to close at $73.20 per barrel.

Oil prices stabilised as the financial markets staged a comeback on Tuesday after the sell-off in the previous session.

Escalating tensions in the Middle East appear to be providing a floor for oil prices with Israel preparing for an attack by Iran after Hamas leader Ismail Haniyeh was assassinated in Tehran last week.

Iran’s vow of retaliation against Israel and the U.S. following the killing of two militant leaders has raised concerns that a wider war is brewing in the Middle East, which could have a direct impact on supplies from the region.

The oil market has largely looked past geopolitical tensions in the Middle East as crude supplies have not faced any major disruption. Analysts have warned for months that a direct conflict between Israel and Iran, a major producer in the Organisation of the Petroleum Exporting Countries (OPEC) could lead to a disruption of oil flows.

Lower production at Libya’s 300,000 barrel-per-day Sharara oilfield is also adding to concerns of supply shortages.

Libya’s National Oil Corporation (NOC) said on Tuesday that production would decrease in the field due to the gradual protests.

Recent declines in crude oil and fuel inventories at major trading hubs also supported oil prices.

Global oil inventories decreased by around 400,000 barrels per day in the first half of this year, according to US Energy Information Administration (EIA) estimates published on Tuesday. It expects stockpiles to decline by around 800,000 barrels per day in the second half of the year.

The agency lowered its average oil price forecasts for this year and next year, citing recent declines precipitated by economic concerns. It still expects higher prices in the coming months. Brent spot prices will range between $85 and $90 per barrel by the end of the year, the EIA said.