Oil held the bulk of Monday’s surge as the Israel-Hamas war remained contained and Saudi Arabia pledged to help ensure market stability.
West Texas Intermediate edged above $86 a barrel after a war-risk premium returned to the market on Monday following Hamas’ surprise attack on the weekend. The kingdom reiterated its support for efforts by OPEC+ to balance oil markets and for “everything” that would contribute to enhancing the growth of the global economy, the state-run Saudi Press Agency reported.
The oil market has been transfixed by events in Israel and Gaza since Hamas’ surprise assault on Saturday in case the conflict spreads, endangering crude flows. The war adds another complicated dimension to global crude trading after prices surged in the third quarter as OPEC+ choked off supplies to tighten the market, then gave up some gains as demand concerns flared up.
More than 2,000 people have died so far, with Israel building a massive base next to the Gaza Strip ahead of a possible ground invasion of the coastal enclave to take on Hamas as it moves to the next phase of its retaliation.
Any proof that Iran, a supporter of Hamas, was directly involved in the attack could threaten oil flows. The main risks are stricter enforcement of US sanctions on the country’s crude exports, or blockades by Tehran of key shipping lanes, possibly with attacks on vessels. Iran has denied involvement and the White House has no confirmation the nation directed the assault.
“The market now needs to price in the tail-risk of any escalation of the conflict, and its implications on crude-supplying nations, such as Iran,” said Gao Mingyu, Beijing-based chief energy analyst at SDIC Essence Futures Co.
The US and Venezuela, meanwhile, are close to reaching an understanding that would bring limited sanctions relief in exchange for steps to ensure fair elections, according to people familiar with the matter. As part of the informal deal, the US would be willing to lift some oil and banking sanctions.
In Asia, China is considering new measures to help its economy meet the official growth target, which could boost demand in the top oil importer. An announcement may come this month, people familiar said.
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--With assistance from Sarah Chen.
