Fears of widespread conflict in the Middle East have sent crude oil soaring. A jump of more than 3 percent has been recorded in oil prices and Brent crude has reached close to $ 80. For the first time since August, the price of Brent reached above $80 per barrel. The growing risk of a region-wide Middle East war pulled investors out of last month’s record bearish position, Reuters reported. Brent crude futures settled at $80.93 a barrel, up $2.88 or 3.7%. U.S. West Texas Intermediate futures rose $2.76, or 3.7%, to $77.14 a barrel.
Then crude may become expensive by 3 to 5 dollars per barrel.
According to the news, Brent rose more than 8 percent last week and WTI rose more than 9 percent week-on-week, the highest in more than a year. Following Iran’s October 1 missile attack against Israel, concerns were raised that an Israeli response would target Tehran’s oil infrastructure. Andrew Lipo, president of Lipo Oil Associates, said that if that happens, oil prices could rise by $3 to $5 a barrel.
Conflict spread throughout the Middle East
Rockets fired by Iran-backed Hezbollah targeted Haifa, Israel’s third-largest city, early Monday. Meanwhile, Israel looks set to expand ground incursions into southern Lebanon on the first anniversary of the Gaza war, which has spread conflict across the Middle East. Analysts at Tudor, Pickering, Holt & Co wrote on Monday that there is growing concern that the conflict could escalate. The conflict not only puts Iran’s 3.4 MMbopd (million barrels of oil per day) production at risk, but also creates further bottlenecks in regional supplies.
Buy now, ask questions later, such a market
UBS analyst Giovanni Stanovo says Monday’s gains were likely driven by money managers offloading bearish bets on the growing risk of Middle Eastern oil supply disruptions. Hedge funds and money managers had placed record bearish bets on oil futures by mid-September, Reuters reported, particularly due to a decline in demand in China, the biggest importer of crude. John Kilduff, partner at Again Capital in New York, said there was a lot of short-covering in the market that started last week and is still continuing. He said buy now, ask questions later, such is the market.
