Myra P. Saefong, assistant global markets editor, has covered the commodities sector for MarketWatch for 20 years. She has spent the bulk of her years at the company writing the daily Futures Movers and Metals Stocks columns and has been writing the weekly Commodities Corner column since 2005.
What happens to oil prices, and production and supply flow in the Middle East, is highly dependent on whether Iran was directly involved in the attack by Palestinian militant group Hamas on Israel last weekend, analysts say.
Iran has been known to provide funding and training to Hamas. It is a significant producer in the energy market — the fifth-largest crude-oil producer in the Organization of the Petroleum Exporting Countries in 2021 and the world’s third-largest natural-gas producer in 2020, according to the Energy Information Administration .
That news contributed to Wednesday’s decline in oil prices, said Babin. On Wednesday, U.S. crude benchmark November West Texas Intermediate oil CL.1, -2.27% CLX23, -2.27% fell $2.48, or 2.9%, to settle at $83.49 a barrel on the New York Mercantile Exchange. December Brent BRN00, +0.54% BRNZ23, +0.54% ended at $85.82 a barrel on ICE Futures Europe, down $1.83, or 2.1%. Prices for both WTI and Brent had settled with a gain of more than 4% on Monday.
Iranian crude-oil exports are at a 5-year high due to soft enforcement by the U.S., said Babin. Iranian exports topped 2 million barrels per day in August and are set to increase by 700,000 barrels per day year on year and that would make Iran the second-largest source of supply growth behind the U.S. this year, she said.
Still, the rally would be “contained by the fact that OPEC+ has more than 4 of spare capacity that it would bring back online to fill the supply gap,” and it’s likely to do so in this scenario, she said. Saudi influence The impact from the Israel-Hamas conflict, however, may also include Saudi Arabia, said Babin.
“Price impact s limited as it is more supportive of crude prices than catalyst for significant upside,” she said. There are 350 million barrels in the SPR, and the U.S. is producing around 13 million barrels of crude a day versus the 1980s when it was producing less than 5 million barrels a day, she said. “It would not be popular to tap SPR again.”
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