Oil prices rose sharply on Thursday, reacting to a statement by United States President Joe Biden, who indicated he was in discussions with Israel regarding possible strikes on oil installations in Iran. This announcement immediately sparked reactions in the markets, reflecting investors’ concerns about a possible disruption in oil supplies.
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%, reaching $76.72. For its part, a barrel of West Texas Intermediate (WTI), for delivery in November, gained 4.28%, settling at $73.10. These increases come after the two main oil benchmarks had already recorded gains of more than 5% earlier in the session.
Market Reactions and Investor Concerns
Biden’s statement had an immediate impact on oil prices, with investors concerned that strikes on Iranian production sites could affect global supplies. Iran, which is among the world’s top ten oil producers, has the third largest proven reserves behind Venezuela and Saudi Arabia. Ole Hvalbye, analyst at Rystad Energy, commented to AFP that such strikes “could cause the market to lose two to three million barrels per day in the worst-case scenario”.
Escalation of Tensions in the Middle East
Recent military tensions between Israel, Iran and Hezbollah have fueled fears of an uncontrollable escalation in the region. An Israeli strike on a Hezbollah aid center in Beirut killed seven people Thursday morning, followed by ground fighting in southern Lebanon. Hezbollah claimed to have repelled an attempted Israeli advance on the border, while the Israeli army said it was carrying out limited and localized operations.
Meanwhile, Yemen’s Iran-backed Houthi rebels announced a drone attack in Israel, further escalating tensions. These developments have heightened market concerns about the stability of oil supplies, although some factors are mitigating these concerns.
Mitigating Factors in the Oil Market
Despite geopolitical tensions, oil prices remain relatively contained. The U.S. Energy Information Administration (EIA) reported an increase in crude oil inventories of 3.9 million barrels last week, beating analysts’ expectations for a rise of 1.4 million. This accumulation of stocks offers room for maneuver to the markets, reassuring about the capacity of the global economy to absorb a possible supply shock.
In addition, the Libyan Oil Minister announced in an interview with Bloomberg that Libya would resume oil production on Thursday, reintroducing hundreds of thousands of barrels per day to the markets. The recovery follows the resolution of a month-long political crisis in the country, helping to stabilize global supply.
OPEC+ Decisions and Future Outlook
The Organization of the Petroleum Exporting Countries and their allies (OPEC+) maintained its plan to increase production by an additional 2.2 million barrels starting in December at a meeting on Tuesday. Claudio Galimberti of Rystad Energy pointed out that “OPEC+ still has unusually large spare capacity” and could therefore produce even more if needed. This flexibility provides some assurance in the face of geopolitical uncertainties, although the situation remains volatile.
In conclusion, oil markets are currently being influenced by a combination of geopolitical tensions and economic factors that are moderating the immediate impact of Biden’s statements. Market participants are closely monitoring developments in the Middle East and OPEC+ decisions to assess future oil price developments.
