Brent moves up as Middle Eastern conflict escalates

The front-month ICE Brent contract has gained $1.01/bbl on the day, to trade at $78.85/bbl at 09.00 GMT.

PHOTO: Getty Images

Upward pressure:

Brent futures found some support after clashes between the Israel Defense Forces (IDF) and Palestine-based Hamas militants resumed this week, offsetting talks of a ceasefire in exchange for hostages on both sides.

“Attacks on ships in the Red Sea and Israel widening its Gaza ground offensive move oil [prices] higher,” said Price Futures Group’s senior market analyst Phil Flynn.

Meanwhile, Yemen-based militant group Houthi allegedly launched drone attacks on three vessels in the southern part of the Red Sea over the weekend, sparking fears of supply disruption in the global oil market.

Oil market analysts are speculating that these recent attacks could trail back to Iran’s involvement in the Israel-Hamas war. In that case, the US government will not hold back from imposing stricter sanctions on Iranian oil soon.

“Following recent events in Israel and the possibility of Iranian involvement, there is the risk that the US will start to enforce sanctions more strictly in future,” said two analysts from ING Bank. “If this were to happen, we could see more than 500Mbbls/d [500 million b/d] of supply lost,” they further added.

Downward pressure:

Meanwhile, OPEC+'slatest bid to bring a “balance” in the oil market has not provided much support to Brent’s price in recent days because oil traders are underconfident about the actual supply cuts that will be made in 2024.

OPEC and its allies announced voluntary supply cuts for 2024 during their joint ministerial meeting last week but failed to agree on a group-wide cut in 2024.

“We are seeing voluntary cuts from a handful of members,” analysts from ING Bank said. “Clearly, given the scale of cuts we are already seeing from the group, it is becoming increasingly more difficult for some members to stomach further cuts,” they further added.

Meanwhile, OPEC+’s latest addition Brazil that joins the group in January 2024 confirmed that it will not take part in the group’s output caps, chief executive of Brazil’s state-run oil firm Petrobras told Reuters.

By Aparupa Mazumder

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