Oil prices climbed on Monday, as traders assessed implications for crude supplies after a surprise, deadly attack by Hamas on Israel over the weekend.
Price action
-
West Texas Intermediate crude for November delivery
CL00,
+3.50%CLX23,
+3.50%
rose $2.90, or 3.5%, to $85.69 a barrel on the New York Stock Exchange. -
December Brent crude
BRN00,
+3.36%BRNZ23,
+3.36%,
the global benchmark, was up $2.81, or 3.3%, to $87.39 a barrel. -
November gasoline
RBX23,
+3.00%
rose 2.7% to $2.25 a gallon, while November heating oil
HOX23,
+2.43%
gained 2.2% to $2.96 a gallon. -
November natural gas
NGX23,
+1.71%
added 1.8% to $3.40 per million British thermal units.
Market drivers
The energy market was on edge after the surprise attacks by Hamas on Israel on Saturday, notably as The Wall Street Journal reported that Iranian security officials aided Hamas in the planning. The attacks have left around 700 people dead in Israel and nearly 500 in Gaza, with Hamas also claiming to hold more than 130 captives.
Oil prices surged over 4% as trading opened on Sunday, amid concerns that any involvement of Iran, if affirmed, will mean possible sanctions on that country’s crude exports, which have pushed toward pre-2018 levels in recent months.
Oil fell last week, retreating after Brent moved within a few dollars of the $100-a-barrel threshold last month and WTI briefly topped $95 a barrel for the first time in more than a year.
Some analysts have put Iranian crude production at more than 3 million barrels a day and exports above 2 million barrels a day — the highest levels since the Trump administration pulled the U.S. out of the Iranian nuclear accord in 2018, according to The Wall Street Journal. Sales fell to around 400,000 barrels a day in 2020 as the U.S. reimposed sanctions.
Edward Morse and a team at Citigroup said the attacks will likely have bullish implications for oil, but for how long is the question. The attacks, he notes, coincide with the 50th anniversary of the Yom Kippur War in October 1973, which “ushered in a period of exceptionally high oil prices and nearly completely transformed the structure of global oil and product markets.”
“Timing is everything and the attacks almost certainly postpone any Saudi/Israeli rapprochement, along with any high probability expectation of Saudi Arabia reducing or eliminating its extra 1-m b/d [million barrels per day] cut if prices resume their recent fall. Risks also grow for an Israeli attack on Iran, given its support and encouragement to Hamas, with timing an open question. Meanwhile, any expansion of battles will have potential repercussions on oil markets,” said Morse and the team.
A team led by Goldman Sachs analyst Daan Struyven said he sees as unlikely any “immediate large effect on the near-term supply-demand balance and near-term oil inventories,” the main mover for oil prices. He said they continue to expect Brent prices to reach $100 a barrel by June 2024.
The Goldman team also pointed out to the reduced possibility of a Saudi-Israeli deal that would boost production as well as downside risks to Iranian production.
