Oil soars after Biden says US discussing possible Israeli strikes on Iran oil facilities
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Iran is a member of the Opec oil cartel, producing around 3.2 million barrels per day, or 3 per cent of global output.
PHOTO: PEXELS
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Singapore - Oil pushed higher on Oct 4 – following its biggest one-day jump in almost a year – on concerns that Israel may decide to strike Iranian crude facilities in retaliation for a missile barrage earlier this week.
On Oct 3, US President Joe Biden – when asked if he would support Israel attacking Iran’s crude facilities – said: “We’re discussing that.”
Later, a US official said the administration was still in talks with Israel, and believed that no decision had been taken yet.
Brent crude futures rose 0.7 per cent to US$78.17 a barrel as at 8.31am GMT on Oct 4. US West Texas Intermediate futures were also up 0.7 per cent at US$74.21 a barrel, after surging more than 5 per cent on Oct 3. Both benchmarks were headed for weekly gains of about 9 per cent.
Crude has soared this week as the escalation of tensions in the Middle East raised the possibility that supplies from the region, which accounts for about a third of the world’s total, could be disrupted. Israel and Iran, as well as Tehran’s proxies in Lebanon, Gaza and elsewhere, have been facing off for the past year, stoking concerns of an all-out conflict that could draw in the United States.
Iran is a member of the Opec oil cartel, producing around 3.2 million barrels per day, or 3 per cent of global output.
It fired a barrage of missiles into Israel earlier this week, after Israel stepped up its offensive against Tehran-backed Hezbollah, including sending its troops into southern Lebanon. On Oct 3, the US-led Group of Seven nations called on countries in the region “to act responsibly and with restraint”.
A picture taken from northern Israel along the border with southern Lebanon shows smoke billowing above the south Lebanon during Israeli bombardment on Oct 3.
PHOTO: AFP
Citigroup has estimated that a major strike by Israel on Iran’s export capacity could take 1.5 million barrels of daily supply off the market. If Israel struck minor infrastructure, such as downstream assets, 300,000 to 450,000 barrels of output could be lost, it said.
Analysts have also expressed concern that Tehran could raise the stakes by targeting energy infrastructure in neighbouring states or supply routes, including the critical Strait of Hormuz.
Oil’s jump – if sustained – may contribute to a resurgence in inflation just as many central banks, including the US Federal Reserve, have started to ease interest rates after the pace of price gains ebbed. Costlier crude would over time feed through into higher petrol prices at the pump.
Beyond the Middle East crisis, there are signs of ample supplies. Opec+ intends to restore some of its shuttered capacity, with increases set to start from December. Libya, meanwhile, has been restarting production, returning hundreds of thousands of barrels a day, after a political stand-off in the country eased. BLOOMBERG
