Oil rises as worries about a Middle East outbreak from the Israel-Gaza conflict grow

20 Oct 2023 , 10:11 AM

Fears that the Israel-Gaza conflict may spread throughout the Middle East and disrupt supply from one of the world’s top producing regions caused oil prices to rise by almost 1% on Friday, prolonging their recent gains.

Brent crude futures had increased by 77 cents, or 0.8%, to $93.15 per barrel. West Texas Intermediate crude for the United States was up 99 cents, or 1.1%, to $90.36 per barrel. Friday marks the end of the front-month November contract.

The more actively traded December WTI contract was up 76 cents to $89.13 per barrel.

Given the explosion at a Gaza hospital this week and the expected ground invasion by Israeli troops, which raised concerns about the conflict expanding throughout the Middle East, both contracts are expected to post a second weekly gain.

Israeli Defence Minister Yoav Gallant hinted that a predicted ground invasion might be approaching when he informed troops assembled at the Gaza border on Thursday that they would soon see the Palestinian enclave ‘from inside.’

According to the Pentagon, US intercepted missiles fired at Israel from Yemen.

If WTI overcomes support at $91.50, prices could advance towards a peak last seen in late September at $95.03 per barrel, according to Sycamore.

Forecasts of a growing deficit in the fourth quarter, as major producers Saudi Arabia and Russia extended production cutbacks through the end of the year, and low stocks, particularly in the US, are further factors supporting oil prices.

The U.S. Department of Energy announced on Thursday that Washington is attempting to purchase 6 million barrels of petroleum for delivery to the Strategic Petroleum Reserve in December and January as part of its ongoing plan to restock the emergency stockpile.

Separately, OPEC+ sources told Reuters that a slow recovery in output is likely to necessitate any policy changes by the producer group for the time being, given that the temporary removal of U.S. oil sanctions against OPEC member Venezuela.

According to news reports, Venezuela’s state-run oil corporation PDVSA has started getting in touch with clients who have contracts for the delivery of crude, and it is starting to resume cash sales to international refiners.

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