Oil Rises as Tensions Ratchet Up
(Bloomberg) -- The threat of war in the Middle East is pushing oil prices higher again, capping one of the most dramatic ever weeks for crude in which 5% of the world’s supplies were cut by attacks on Saudi production facilities.
While Saudi Arabia’s efforts to restore output and assurances that the world has adequate supply have helped temper some of the unprecedented gains in the aftermath of the attacks, prices are still up almost 8% this week near $65 a barrel. The U.S. and Saudis say evidence points to Iran’s involvement and the threat of retaliatory action against the Islamic Republic is keeping oil elevated. Iran’s foreign minister warned that any strike would lead to “all-out war.”
The ratcheting up of instability in the world’s most important oil-producing region has raised the risk premium for prices, which are almost $5 a barrel higher than before last weekend’s attacks on the Saudi facilities. There’s also prevailing concern about how long it will take the kingdom to fully restore lost production, as it depletes reserves to meet supply commitments and operates without its usual buffer of spare capacity.
“The market has taken Saudi reassurances on restoration of full production by the end of this month with a grain of salt, given the estimated extent of damage at Abqaiq,” said Vandana Hari, founder and chief executive officer of Vanda Insights in Singapore. “The mounting rhetoric between the U.S. and Iran adds to the market’s nervousness, but I see less than a tail risk of military conflict in the region.”
Options traders have become the most bullish on Brent crude in eight years due to concerns over security of oil supplies. The unprecedented strike and cross-accusations involving Saudi Arabia and Iran in the past week have driven up the price of one-month benchmark calls to their most expensive relative to puts since March 2011.
Brent crude for November settlement rose 26 cents, or 0.4%, to $64.66 a barrel on the ICE Futures Europe Exchange as of 8:07 a.m. in London. The contract is up 7.4% this week, the biggest weekly increase since January.
West Texas Intermediate for October delivery gained 48 cents, or 0.8%, to $58.61 a barrel on the New York Mercantile Exchange. The American benchmark up about 7% this week, the most since June.
The global benchmark crude was at a $6.05 premium to the U.S. marker for the same month, while the cost of prompt supplies of the London grade against later shipments increased earlier this week to the highest level since late-June.
“Given the level of uncertainty into the weekend, prices could remain skewed to the upside,” Stephen Innes, Asia-Pacific market strategist at AxiTrader, said in an emailed note.
Some of the gains in prices have also been tempered by a storm flooding the U.S. Gulf Coast, threatening to curb demand for crude. The remnants of Tropical Storm Imelda dumped more than three feet of rain on parts of the Texas coast, cutting refinery operations and shutting a key pipeline.
--With assistance from Heesu Lee.
To contact the reporter on this story:
Saket Sundria in Singapore at ssundria@bloomberg.net
To contact the editors responsible for this story:
Serene Cheong at scheong20@bloomberg.net
Alexander Kwiatkowski, Ben Sharples
WHAT DO YOU THINK?
Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.
- ExxonMobil Racks Up Discoveries in Guyana Block Eyed by Chevron
- Oil Market Sentiment Has Improved Significantly
- EU, US Eye Collaboration on Nuclear Materials
- EU Electricity Export to Ukraine Up 94 Percent in Two Years
- China Coal Output Falls for First Time since Government Ordered More
- USA Driving Activity to Increase to All-Time Highs
- BP Pulse Buys One of Europe's Largest Truck Stops
- UK CCUS Plans Outdated: Think Tank
- TC Energy to Sell Prince Rupert Gas Pipeline Project to First Nation
- I Squared Eyes Full Ownership of Europe Gas Storage Firm
- Norway Regulator Blasts Proposal to Halt New Oil and Gas Permits
- Chinese Mega Company Makes Major Oilfield Discovery
- EIA Drops 2024 Henry Hub Gas Price Forecast
- EIA and Standard Chartered Offer Up Latest Oil Price Predictions
- Red Sea Region Sees Another Watershed Incident
- Chevron Oil Project in Kazakhstan to Cost $48.5B
- OPEC Voices Encouragement after IEA Affirms Support for Oil Security
- Biden Govt Bares Strategy for Freight Charging, Hydrogen Fueling Infra
- Ukraine Hits Third Russian Refinery In Escalating Drone Strikes
- Rystad Looks at the Buzz Around White Hydrogen
- VIDEO: Missile Attack Kills Crew Transiting Gulf of Aden
- Norway Regulator Blasts Proposal to Halt New Oil and Gas Permits
- Chinese Mega Company Makes Major Oilfield Discovery
- What Is the Biggest Risk to Offshore Oil and Gas Personnel in 2024?
- Is Peak Oil Demand Close?
- Vessel Sinks in Red Sea After Missile Strike
- JP Morgan, Standard Chartered Reveal Latest Oil Price Forecasts
- Exxon Rights in Stabroek Do Not Apply to Hess Merger with Chevron: Hess
- Rystad Forecasts Net Production of Top Permian Producers in 2024
- Analysts Reveal Latest Oil Price Outlook Following OPEC+ Cut Extension