Crude Oil Prices Rise Amid Middle East Tensions and Growing U.S. Inventories

Petroleum Price

• Oil prices ticked higher in early trade on Thursday as investors weighed the escalating conflict in the Middle East and the potential for disruptions to crude flows against an amply supplied global market.
• Brent crude futures increased by 64 cents, or 0.87%, to $74.54 a barrel as of 0006 GMT. U.S. West Texas Intermediate (WTI) crude futures gained 72 cents, or 1.03%, to $70.82 a barrel.
• MCX Crude Oil prices opened at 5991 with a gain of 0.94%.

Petroleum Demand and Supply

• U.S. crude inventories rose by 3.9 million barrels to 417 million barrels in the week ended September 27, the Energy Information Administration (EIA) reported, compared with analysts’ expectations in a Reuters poll for a 1.3 million-barrel draw.
• “Swelling U.S. inventories added evidence that the market is well supplied and can withstand any disruptions,” ANZ analysts said in a note.
• Some investors remained unfazed as global crude supplies have yet to be disrupted by unrest in the key producing region, and OPEC's spare capacity has tempered concerns.
• “After Iran’s attack, prices may stay elevated or remain more volatile for a little longer, but there’s enough production, there’s enough supply in the world,” Jim Simpson, Chief Executive Officer of East Daley Analytics, told Reuters.
• OPEC has enough spare oil capacity to compensate for a full loss of Iranian supply if Israel knocks out that country’s facilities.

Petroleum News

• Brent crude prices surged over four percent overnight as geopolitical tensions in the Middle East escalated following Iran's offensive against Israel in recent days. The recent ballistic missile strike by Iran on Israel has heightened fears of a wider regional conflict, leading to a spike in crude prices due to mounting concerns about potential supply disruptions.
• Despite the geopolitical tensions, some investors remained optimistic, noting that global crude supplies have not yet been affected by the unrest in the region, and the spare capacity within the Organization of the Petroleum Exporting Countries (OPEC) is helping to alleviate concerns.
• OPEC has sufficient spare oil capacity to cover a complete loss of Iranian supply in the event that facilities are targeted. However, traders are apprehensive that the producer group might face challenges if Iran retaliates against the installations of its Gulf neighbors.

Expert Opinion

A spike in crude oil prices puts pressure on oil marketing companies as it lifts their input costs for refining and distribution, thereby squeezing margins. Higher crude prices can also trigger increased prices for petrol, diesel, and other petroleum products at the pump, which can reduce consumer demand and adversely affect sales volumes.