Oil leaps over $3 after US sanctions Russian tankers, wraps volatile week on Israel-Hamas war; Brent up $89/bbl

Brent futures rose $3.21, or 3.7 per cent, to $89.21 per barrel and US West Texas Intermediate (WTI) crude gained $3.11, or 3.8 per cent, to $86.02 a barrel, after earlier breaking the $4 barrier. Despite fluctuations through the week in both crude benchmarks, Brent was set for a weekly gain of 5.4 per cent. its highest such increase since April. WTI was set to climb about 3.8 per cent for the week, after both surged on Monday, according to news agency Reuters.

Back home, on the Multi Commodity Exchange (MCX), crude oil futures due for a October 19 expiry, was last trading higher by 4.41 per cent at ₹7,200 per bbl, having swung between ₹6,962 and ₹7,237 per bbl during the session so far, against a previous close of ₹6,896 per barrel.

Also Read: OPEC sticks to 2024 oil demand, IEA downgrades on macro concerns

What’s driving crude oil prices?

-On Thursday, the US government imposed the first sanctions on owners of tankers carrying Russian oil priced above the G7’s price cap of $60 a barrel, to close loopholes in the mechanism designed to punish Russia for its invasion of Ukraine. Russia is the world’s second-largest oil producer and a major exporter and the tighter US scrutiny of its shipments could limit the supply.

-The uptick in oil prices was driven by the potential for disruptions to Middle Eastern exports after the weekend attack by militant group Hamas on Israel threatened a wider conflict.

-The Organization of the Petroleum Exporting Countries (OPEC) kept its forecast for growth in global oil demand, citing signs of a resilient world economy so far this year and expected further demand gains in China, the world’s biggest oil importer.

-The International Energy Agency (IEA) lowered its oil demand growth forecast for 2024, suggesting harsher global economic conditions and progress on energy efficiency will weigh on consumption. The agency now sees 2024 demand growth at 880,000 barrels per day (bpd), compared with its previous forecast of 1 million bpd. However, it raised its 2023 demand forecast to 2.3 million bpd from a forecast of 2.2 million.

-Oil has had a volatile week. Traders are trying to price in the potential for the war to draw in Iran, a supplier of arms and money to Hamas, and any risk of a disruption of wider flows. While supply has not been meaningfully affected so far, traders said that Friday’s rally indicated investors are removing bearish bets before the weekend, according to a report by Bloomberg.

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Updated: 13 Oct 2023, 10:05 PM IST