Oil Prices Surge Amidst Middle East Tensions; Supply Concerns Heighten

Oil prices experienced significant gains on Friday, with a 1% rise, driven by growing concerns about the Israel-Gaza conflict's potential to expand throughout the Middle East, which could disrupt supplies from one of the world's top-producing regions.

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Oil prices experienced significant gains on Friday, with a 1% rise, driven by growing concerns about the Israel-Gaza conflict's potential to expand throughout the Middle East, which could disrupt supplies from one of the world's top-producing regions.

Brent crude futures saw an increase of 77 cents, equivalent to 0.8%, reaching $93.15 per barrel by 0042 GMT. Simultaneously, US West Texas Intermediate (WTI) crude stood at $90.36 per barrel, marking a surge of 99 cents, or 1.1%. The front-month November contract was set to expire on the same day.

The more active December WTI contract traded at $89.13 a barrel, showing an increase of 76 cents. Both contracts were on the verge of posting a second weekly gain, with heightened fears of the conflict spreading throughout the Middle East following an explosion at a Gaza hospital earlier in the week and the anticipation of an Israeli ground invasion.

IG analyst Tony Sycamore expressed concerns, stating, "It's quite scary. In fact, looks like things could spiral out of control." He added, "The bigger concern remains that the escalation of tension... means the risk to crude oil prices is towards higher levels."

Israeli Defence Minister Yoav Gallant's statement to troops at the Gaza border on Thursday, hinting at an expected ground invasion, further fueled these concerns. Meanwhile, the Pentagon confirmed the interception of missiles fired from Yemen toward Israel.

Sycamore suggested that if WTI prices manage to break the resistance at $91.50, they could rise towards a high last seen in late September at $95.03 per barrel.

Furthermore, oil prices found support from forecasts of a widening deficit in the fourth quarter. This is due to top producers Saudi Arabia and Russia extending supply cuts until the end of the year, alongside low inventories, especially in the United States.

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In a separate development, the US Department of Energy announced Washington's intention to purchase 6 million barrels of crude for delivery to the Strategic Petroleum Reserve in December and January as part of its plan to replenish the emergency stockpile.

Additionally, the temporary relaxation of US oil sanctions on OPEC member Venezuela is expected to have a gradual impact, and no immediate policy changes are foreseen by the OPEC+ producer group. Venezuelan state-run oil company PDVSA has initiated contact with customers holding crude supply contracts, signalling its intent to resume cash sales to global refiners.

These events collectively underline the volatile state of the oil market in response to the escalating situation in the Middle East and the evolving dynamics of the global oil supply landscape.