Oil futures: Brent eases back from highs, Iran greenlights attack
Quantum Commodity Intelligence – Crude oil futures Thursday eased back from highs, after benchmarks had initially extended the previous session's solid gains after reports that Iran's leadership had approved strikes against Israel, sparking fears of a further escalation in the Middle East conflict.
Front-month Oct24 ICE Brent futures were trading at $80.28/b (1655 GMT), compared to Wednesday's settle of $80.84/b, although down from the day's high of $81.80/b as a wave of profit-taking overwhelmed later during the session.
At the same time Sep24 NYMEX WTI was trading at $77.18/b, versus Wednesday's settle of $77.91/b.
The New York Times reported that Iran's supreme leader, Ayatollah Ali Khamenei, had issued an order for Iran to strike Israel directly in retaliation for the killing in Tehran of Hamas's leader Ismail Haniyeh.
The Hamas chief was killed in the Iranian capital early Wednesday in what was believed to be an Israeli missile strike, coming a day after Hezbollah's senior military figure was also killed in an Israeli attack on Beirut.
The Israeli strikes fuelled concerns that a wider military conflict could eventually impact on oil shipments in the wider region.
"Brent crude trades back above $80/b in response to renewed worries about stability in the Middle East, after Hamas said Israel had killed its political leader, who was on a visit to Iran," said Ole S Hansen, Head of Commodity Strategy at Saxo Group.
"Together with rumblings between Israel and Hezbollah in Lebanon, the market is once again forced to focus on the unlikely risk of conflict spilling over to other parts of the Middle East," added Hansen.
The buying spree was also felt in the options market with exchange data showing that over 300,000 Brent call options transacted Wednesday, the highest daily figure since April.
Inventories
Oil benchmarks were also given a midweek boost after Energy Information Administration data showed US commercial crude oil inventories retreated for a fifth consecutive week, with the draw coming primarily from the Gulf Coast area.
Commercial inventories were 3.436 million barrels lower through the week to 26 July, surpassing expectations of a narrower drop of 1-2 million.
US gasoline stocks also fell to their lowest level this year as refinery issues further curtailed domestic runs, while demand stayed above the important 9 million bpd mark that signifies healthy summer consumption.
Gasoline inventories sank 3.67 million barrels or 1.6% to 223.8 million barrels in the seven days to 26 July, EIA data showed Wednesday.
Otherwise, the OPEC+ of JMMC meeting Thursday made no major policy recommendation, although left the door open on the timetable for unwinding rate cuts.
Meanwhile, the US Federal Reserve held interest rates unchanged for now, as expected, but Fed Chair Jerome Powell said a rate cut in September is "on the table".
Slightly weighing on markets, latest official Chinese data revealed that manufacturing activity eased to a five-month low in July as factories struggled for new orders.
