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Oil prices rose to their highest level since the start of the conflict between Israel and Hamas, near $90 a barrel, as concerns about a possible ground attack on Gaza heightened tensions in commodity markets.
Global benchmark Brent crude rose 4% to $89.94 a barrel on Friday, hitting its highest since Hamas attacked Israel over the weekend.
Prices rose after the Israeli military warned more than 1 million people to leave Gaza City and its suburbs and move to the southern part of the enclave for what the United Nations said was a 24-hour deadline.
“Whatever happens this season, we’re going to get oil to $100 (a barrel),” said Joe DeLaura, global energy strategist at Rabobank.
“Prices could easily get worse (higher) until we find a point of stability,” said Ole Hansen, head of commodity strategy at Saxo Bank. “When Israel just ordered a million people to leave (northern) Canada,” he added, No one in their right mind would have taken a short position (in oil) during this time. This could lead to a massive escalation.”
Oil prices have been flat this week, with traders believing a supply tightening is unlikely. Prices remain well below the $97 a barrel reached in late September, when Saudi Arabia and Russia extended production cuts until the end of 2023.
Even after Israel asked people to leave northern Gaza, “the market still hasn’t really aggressively priced in an escalation outside of Israel (and) Gaza, otherwise our oil prices and gas prices would be higher,” David Hewitt said. Consultant to Hewitt Energy Outlook. European natural gas prices hit their highest since February on Friday.
But the International Energy Agency warned on Thursday that “markets will continue to be on tenterhooks as the crisis unfolds” on concerns that the conflict could spread further in the Middle East, which accounts for more than a third of global seaborne oil trade.
JPMorgan analysts said there was “no immediate impact” on global oil production and that the Israeli conflict was unlikely to “trigger a significant rise in oil prices from current levels” before the end of the year.
However, the expansion of the conflict will change the status quo. The bank warned that supplies could take a hit if the United States strictly enforces restrictions on Iranian oil exports or if the conflict between Israel and Hamas results in disruptions in the Strait of Hormuz, a major oil chokepoint.
Iran’s Foreign Minister Hossein Amirabdullahian warned on Thursday that large-scale Israeli attacks on Gaza could encourage other militant groups – such as Iran-backed Lebanon’s Hezbollah – to join the conflict.
“Cutting off water, electricity, food and medicine to the residents of Gaza is an organized war crime. . . . This may trigger a reaction from others in the ‘axis of resistance,'” he told a news conference in Beirut.
Rabobank’s DeLaura said U.S. sanctions on Thursday on two companies for allegedly violating Russia’s oil price cap also pushed up oil prices. “These sanctions are not important in themselves, but they are a sign of bigger things to come,” DeLaura said.
The International Energy Agency reported on Thursday that global oil demand growth will slow next year due to difficult economic conditions and the impact of improved energy efficiency on consumption. Demand is expected to increase by 880,000 barrels per day in 2024, compared with 2.3 million barrels per day in 2023.
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