Oil prices record second straight weekly gain, hit 6-month high on Middle-East crisis; Brent at $91/bbl

The Brent and US West Texas Intermediate (WTI) crude oil benchmarks rose more than $1 a barrel during trade in the previous session driven by geopolitical tensions. Brent crude settled at $91.17 a barrel, up 52 cents, or 0.57 per cent. 

US WTI crude finished at $86.91 a barrel, up 32 cents, or 0.37 per cent. Both benchmarks settled on Thursday at their highest levels since October, according to news agency Reuters. Coming to domestic prices, crude oil futures settled 0.03 per cent higher at ₹7,286 per barrel on the multi commodity exchange.

Both global benchmarks, Brent and WTI clocked over four per cent gains this week after oil producing major Iran, vowed revenge against Israel for an attack that killed high-ranking Iranian military personnel, according to reports.

What’s driving crude oil prices?

-Adding to geopolitical tensions, Israel has not claimed responsibility for the attack on Iran’s embassy compound in Syria, according to Reuters. Analysts say that if Iran directly attacks Israel – that’s never happened before – it will be just another geopolitical risk domino about to fall.

-The ongoing Ukrainian drone attacks on refineries in Russia may have disrupted more than 15 per cent of Russian capacity, a NATO official said earlier last week, hitting Russia’s fuel output, which could lead to global supply risks.

-The Organization of the Petroleum Exporting Countries (OPEC) and allies led by Russia, known as OPEC+, this week kept its oil supply policy unchanged and pressed some countries to increase compliance with output cuts. Analysts say that the prospect of a tighter market should see a drawdown in inventories during the second quarter of 2024.

-US job growth soared in March, according to official data released on Friday which also showed a steady increase in wages. The gain of 3,03,000 jobs last month points to likely robust oil demand but potentially delays the anticipated interest rate cuts by the US Federal Reserve later this year.

-According to analysts at JPMorgan, the global oil demand is expected to grow by 1.4 million barrels per day (bpd) in the first quarter of 2024. This could add to supply risks amid the ongoing geopolitical conflicts in the Middle-East.

-US energy firms this week cut the number of oil and natural gas rigs operating for a third week in a row for the first time since October. The oil and gas rig count, an early indicator of future output, fell by one to 620 in the week to April 5, the lowest since early February, according to Reuters.

Where are prices headed?

Crude oil is getting war premium due to escalating tensions between Israel-Iran. The Chinese economic data released this week is also better than expected and decline in the US gasoline stocks are also supporting crude oil prices. However, a steady dollar index is limiting gains.

‘’We expect crude oil prices to remain volatile. Crude oil is having support at $85.20–84.40 and resistance is at $86.90-87.70. In INR terms, crude oil has support at Rs7,040-6,940 while resistance is at ₹7,215-7,280,” said Rahul Kalantri, VP Commodities, Mehta Equities Ltd.

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Published: 06 Apr 2024, 10:34 PM IST