Oil futures flat as traders monitor rising Middle East tensions

Posted By: EN Todayon: January 29, 2024In: General Energy News, Oil & Gas News

Oil futures were little changed early Monday after erasing a pop to the upside in Asian trading hours after a drone attack killed three U.S. troops in Jordan, which sparked fears of a wider Middle East conflict that could threaten crude supplies.

Price moves

West Texas Intermediate crude for March delivery
CL00,

CL.1,

CLH24,

rose 9 cents, or 0.1%, to $78.10 a barrel on the New York Mercantile Exchange.
March Brent crude
BRNH24,
-0.01%,
the global benchmark, was up 11 cents, or 0.1%, at $83.66 a barrel on ICE Futures Europe. April Brent
BRN00,
-0.05%

BRNJ24,
-0.05%,
the most actively traded contract, was up 7 cents, or 0.1%, at 83.02 a barrel.

Market drivers

WTI and Brent crude both popped by more than $1 a barrel in Asian trading hours as traders reacted to the drone attack, which killed three U.S. service members and injured more than 30.

U.S. officials blamed the attack on an Iran-backed militia. President Joe Biden vowed retaliation.

The deaths of U.S. troops means the Israel-Hamas war “may have entered a new era of risk when it comes to global oil supplies,” Phil Flynn, an analyst at Price Futures Group, told MarketWatch. While the initial price surge faded, “the fundamental outlook is getting dangerously bullish,” he said.

Oil futures rallied last week to their highest since November, but with gains attributed in part to production outages in the U.S. and more upbeat expectations around economic growth.

Meanwhile, concerns about the risk of miscalculation in the Middle East are growing, “as rational actors may unintentionally become entangled in an escalatory spiral,” Stephen Innes, managing director at SPI Asset Management, said in a note.

“Given the inherent complexity of Middle East conflicts, achieving a stable outcome in the region appears unlikely at this stage, signaling the potential for continued instability with broad global repercussions where higher oil prices are the chief concern, especially in a severe supply disruption scenario, where maritime traffic in the Strait of Hormuz is chocked leading to significant rise in prices,” he wrote.