Oil prices react to Middle East tensions

By Glenn Dyer | More Articles by Glenn Dyer

Like gold, oil ran up and then down as the news of the Israeli reply to Iran’s attack earlier in the week waxed and waned in terms of tensions.

The news, which broke during Asian trading, seemed tailor-made for oil and other commodities such as gold—up they went—then eased when it became clear Iran saw the reply as a bit of ‘tit for tat’ and not too concerning.

As a result, WTI crude oil for May delivery closed up 41 US cents to settle at $83.14 per barrel, the lowest since late March, while June Brent crude, the global benchmark, added 33 US cents to $87.44.

That left WTI down nearly 4% for the week and Brent just over, which, if you think about it, wasn’t a bad outcome given the week’s trading opened with impetus from Iran’s drone and missile attack on Israel and ended with a drone attack from Israel.

The week saw a lot of words spoken, written, and yelled (and added to the unease caused by those attacks in Sydney at the weekend and on Monday night)—all ingredients for a big surge in oil prices.

But it was not to be. Oil prices spiked higher following the attack, with Brent crude briefly rising back above $90.00 in Friday trading in Asia before quickly retreating, as traders returned to selling oil down even as Israel continues its war in Gaza while Yemen's Houthi militants are still attacking Red Sea shipping.

"The Iran-Israel conflict has not impacted the flow of oil in the Middle East, which is why oil price reactions to the recent military escalation have been relatively muted.

However, with no sign that hostilities will de-escalate, direct attacks by Iran and Israel are a new and dangerous phase of mutual antagonism that could yet spill over into the oil market," Jim Burkhard, Head of Research for Oil Markets, Energy and Mobility for S&P Global Commodity Insights, said in a note on Friday.

Of more interest was news of a big rise in oil rig numbers in the US—five.

According to Friday's report from energy services company Baker Hughes (BKR), the weekly count for US oil rigs in use rose to 511 from 506, while gas lost three week to week at 106. The miscellaneous rig number was unchanged at two.

A year earlier, the US had 591 oil rigs in operation, while there were 500 rigs in use at the end of 2023. Overall, 619 rigs were operating in the US last week, down from 753 a year earlier.

Oil majors Exxon Mobil and Chevron are set to release quarterlies on Friday.

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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