The American president said he was “in discussions” with Israel for an offensive on the Middle Eastern country’s oil installations.
It’s time for escalation. Oil prices jumped this Thursday, October 2 after a statement from American President Joe Biden saying he was “under discussion” with Israel on possible strikes against Iranian oil installations. Around 3:10 p.m. GMT (5:10 p.m. in Paris) the price of a barrel of Brent from the North Sea, for delivery in December, rose 3.83% to $76.72. Its American equivalent, a barrel of West Texas Intermediate (WTI), for delivery in November, gained 4.28%, to $73.10. The two oil benchmarks had soared by more than 5% earlier in the session.
To the question “Do you agree with Israeli strikes on Iran’s oil infrastructure?”the American president responded on Thursday: “We are in discussions on this. I think it would be a bit… Anyway”without finishing his sentence, during a brief exchange with the press at the White House. These statements caused prices to jump, with investors fearing repercussions on Iranian supplies.
Iran is among the ten largest oil producers and has the third largest proven reserves behind Venezuela and Saudi Arabia. Strikes on Iranian oil production sites “could cause the market to lose two to three million barrels per day in the worst-case scenario”comments to AFP Ole Hvalbye, analyst at Rystad Energy.
The escalation of tensions
The military escalation of recent days between Israel on the one hand, and Iran and Hezbollah on the other, has raised fears of an uncontrollable situation in the Middle East. An Israeli strike on a Hezbollah relief center in Beirut left seven people dead before dawn on Thursday, the day after ground fighting in southern Lebanon. Hezbollah claims Thursday to have repulsed an Israeli attempt to advance on the border in southern Lebanon, where the Israeli army says it is carrying out limited and localized operations. Yemen’s Houthi rebels, supported by Iran, say they have carried out a drone attack in Israel.
Despite these tensions, oil prices remain contained and their rise must be put into perspective compared to Wednesday’s session during which Brent crossed $75 before falling again on the announcement of American stocks. According to the US Energy Information Administration (EIA), crude stocks increased by 3.9 million barrels last week, compared to only 1.4 million expected by analysts. Such stocks reassure markets about the economy’s ability to withstand a possible supply shock.
Additionally, Libya’s oil minister said in an interview with Bloomberg that Libya was resuming oil production as of Thursday. The announcement, already awaited by markets after the resolution of a month-long political crisis in Libya, is expected to reintroduce hundreds of thousands of barrels of oil per day to the markets. In addition, OPEC+ (Organization of the Petroleum Exporting Countries and their allies) maintained its plan to increase production by an additional 2.2 million barrels starting in December at a meeting on Tuesday. “OPEC+ still has unusually large spare capacity” and could therefore produce even more if necessary, underlines Claudio Galimberti of Rystad Energy.
