During trading session, both the Brent and U.S. West Texas Intermediate (WTI) crude oil benchmarks climbed more than $1 per barrel, fueled by apprehensions surrounding potential supply disruptions amidst escalating tensions between Israel and Iran.
Brent crude settled at $91.17 a barrel, marking a gain of 52 cents, or 0.57%, while U.S. West Texas Intermediate crude finished at $86.91 a barrel, up 32 cents, or 0.37%. Notably, both benchmarks reached their highest levels since October during Thursday’s session.
The uptick in oil prices was attributed to mounting concerns over possible direct conflict between Israel and Iran, with Iran, the third-largest OPEC producer, vowing retaliation against Israel following an attack that claimed the lives of high-ranking Iranian military personnel.
Analysts, including Phil Flynn from Price Futures Group, underscored the significance of the geopolitical tensions, highlighting the potential ramifications of an unprecedented direct attack by Iran on Israel.
Moreover, ongoing Ukrainian drone attacks targeting refineries in Russia have further fueled supply anxieties, with a NATO official estimating disruptions affecting more than 15% of Russian capacity, impacting the country’s fuel output.
Amidst these developments, the Organization of the Petroleum Exporting Countries (OPEC) and its allies, collectively known as OPEC+, maintained their oil supply policy unchanged this week, while urging member countries to enhance compliance with output cuts.
ANZ analysts Daniel Hynes and Soni Kumari suggested that stricter adherence to production quotas could lead to a decline in output in the second quarter, potentially tightening the market and prompting a drawdown in inventories.
However, robust oil demand, exemplified by a significant increase in U.S. job growth in March, may delay anticipated interest rate cuts by the U.S. Federal Reserve later this year. JPMorgan analysts forecasted global oil demand to grow by 1.4 million barrels per day in the first quarter, further underpinning market dynamics.
Meanwhile, U.S. energy firms reduced the number of oil and natural gas rigs operating for the third consecutive week, signaling a potential slowdown in future output, as reported by energy services firm Baker Hughes. The oil and gas rig count fell by one to 620 in the week ending April 5, reaching its lowest level since early February.
