Brent moves higher on rising tension in the Middle East

The front-month ICE Brent contract has gained $1.26/bbl on the day, to trade at $88.23/bbl at 09.00 GMT.

PHOTO: Getty Images

Upward pressure:

Oil investors are concerned about potential supply disruptions due to the ongoing conflict between Israel and Palestinian militant group Hamas. The clashes between Israel and Hamas have sparked fears about the geopolitical tension spreading to other parts of the Middle East.

Oil traders are worried about supply tightness in the global oil market due to high chances of shutting oil fields amid military clashes in the region. Israel has suspended production at the Tamar gas field off its southern coast and has shut operations at Ashkelon port, Reuters reported citing Israel’s energy ministry.

“The key question for markets now is whether the conflict [between Israel and Hamas] remains contained or contagion leaks into oil-producing regions,” said SPI Asset Management’s managing partner Stephen Innes.

Meanwhile, Brent’s upward move was supported by OPEC’s world oil demand projection in its flagship report.

The Vienna-headquartered oil-producer group sees world oil demand to reach 110.2 million b/d in 2028 as the global population will grow and economies will expand. It further expects global oil demand to reach 116 million b/d by 2045, around 6 million b/d higher than its last year’s estimate.   

Downward pressure:

Some analysts argue that clashes between Israel and Hamas may not have an immediate impact on oil supplies.

“The reality, however, is that in a historical context, it is a very muted reaction for a Sunday/Monday oil market opening and oil traders may defer to a wait-and-see mode,” Innes said.

Meanwhile, Brent futures might shed some gains due to potential exemption of US sanctions on Venezuelan oil. The US and Venezuela have reportedly made significant progress in talks towards easing oil sanctions on Caracas, Reuters reported citing sources.

By Aparupa Mazumder

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