Oil Prices Soar as Israel Intensifies Gaza Bombardment

By Adedapo Adesanya

Oil prices climbed about 3 per cent on Friday on worries that tensions in Israel and Gaza could spread into a wider conflict that could disrupt global crude supplies.

Brent futures rose by $2.55 or 2.9 per cent to settle at $90.48 per barrel, and the US West Texas Intermediate (WTI) crude increased by $2.33 or 2.8 per cent to trade at $85.54 per barrel.

On Friday, Israel intensified its attacks in the Gaza Strip with heavy bombing and a communications blackout reported across the embattled territory.

Groups offering aid, including the United Nations, said they had lost all contact with their staff inside the besieged territory. The Palestinian phone service provider, Paltel, said its phone connections and internet services had been cut off.

For the week, Brent was down about 2 per cent and WTI was down about 4 per cent.

Early in the session, oil prices soared by more than $2 a barrel after the US military struck Iranian targets in Syria. Then prices briefly turned negative as markets digested various reports on mediation talks between the militant Hamas group and Israel led by Qatar in coordination with the US.

As of press time, Israel announced the escalation of its operations after several countries, including many Arab states, have urged the country to delay a planned ground invasion that would multiply civilian casualties and might ignite a wider conflict.

These developments have so far not directly affected oil supplies, but many fear disruptions of exports from Hamas backer and major crude producer, Iran, and others.

In other oil-related developments, Goldman Sachs analysts retained their first-quarter 2024 Brent crude price forecast at $95 a barrel but added that lower Iranian exports could cause baseline prices to rise by 5 per cent.

Commodity analysts at Standard Chartered have predicted a further 120 million barrels reduction in global inventories in Q4, on top of the 172 million barrels reduction in Q3. The experts expect the rate of inventory draw to accelerate from 0.52 million barrels per day in October to 1.38 million barrels per day in November and 1.99 million barrels per day in December.

Meanwhile, global oil supply has continued tightening despite record production by US shale. The latest Energy Information Administration (EIA) weekly data was highly bullish with crude oil inventories falling 4.49 million barrels to 419.75 million barrels, taking the deficit below the five-year average to 20.91 million barrels.