Oil Prices Surge as Middle East Tensions Escalate

Highlights:

• Oil prices surge: West Texas Intermediate (WTI) nears $71 per barrel, while Brent crude trades below $74 amid Middle East tensions.
• Supply risks: A major Israeli strike on Iran could cut global oil supplies by up to 1.5 million barrels per day, raising concerns of disruption.
• Adequate reserves: OPEC+ plans to restore capacity in December, while US crude inventories saw a significant rise of 3.9 million barrels.

Supply Concerns Amid Israeli-Iran Conflict

Oil prices rose for the third consecutive day as traders closely monitored escalating tensions in the Middle East. West Texas Intermediate (WTI) moved closer to $71 per barrel, while Brent crude hovered just below $74. At the time of writing, traders assessed supply risks due to Israel's anticipated retaliation against Iran after Tehran's missile barrage earlier this week.

Middle East Tensions and Oil Supply Risks

The ongoing conflict between Israel and Iran, along with their proxies in Gaza, Lebanon, and Yemen, has captured the attention of the global oil market. The region, responsible for nearly one-third of the world’s oil supply, faces potential disruption if energy facilities are targeted or supply routes are blocked. Analysts from Citigroup Inc. have warned that a significant strike on Iran's oil-exporting infrastructure could remove 1.5 million barrels of daily supply from the market. A less severe attack on downstream assets could reduce output by 300,000 to 450,000 barrels.

OPEC+ and US Oil Supplies

Despite the geopolitical turmoil, signs of adequate oil supplies persist. OPEC+ is set to restore some of its capacity starting in December, following a two-month delay. Meanwhile, in the US, crude oil inventories surged by 3.9 million barrels last week, marking the largest increase in five months. This unexpected rise may temporarily ease concerns over global supply shortages.

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