Oil futures: Prices up 4% after Hamas attacks on Israel, off from highs
Quantum Commodity Intelligence – Crude oil futures Monday were sharply higher after the Hamas-led attack on Israel sparked concerns over regional security and the prospect of a second major war in as many years, coming after Russia's invasion of Ukraine.
Front-month Dec23 ICE Brent futures were trading at $88.09/b (1935 GMT), compared to Friday's settle of $84.58/b but off from the earlier high of $89.00/b.
At the same time Nov23 NYMEX WTI was trading $86.33/b, versus Monday's peak of $87.24/b Friday's settle of $82.79/b.
The attack from Hamas left hundreds of Israeli citizens dead following multiple border incursions launched from the Gaza Strip on Saturday.
Although the conflict has no immediate impact on oil production, the situation has rocked regional politics, with the country's Prime Minister Benjamin Netanyahu flagging the prospect of a "long war" following the terrorist atrocities.
"Recognizing the elevated uncertainty and incomplete information at this early stage, we note that there has been no impact to current global oil production, and that we see as unlikely any immediate large effect on the near-term supply-demand balance and near-term oil inventories, which tend to be the main fundamental driver of oil prices," said Goldman Sachs in a client note, maintaining its $100/b Brent forecast by the end of Q2 2024.
Morgan Stanley also noted Monday that neither Israel itself nor any of its direct neighbours are large oil-producing countries, "so we judge the likely impact on oil supplies as minimal for now."
However, the bank cautioned, "this could change if this conflict were to spread."
Israel's Ashkelon oil terminal was closed Monday along with output from the offshore Tamar gas field, while concerns were also flagged over refineries at Haifa and Ashdod, which could be targeted.
Relations
But Goldman also said the events were likely to derail, at least for now, the normalization of Saudi-Israeli relations and associated boost to Saudi production, referencing a Wall Street Journal article published on Friday afternoon prior to the attacks.
"Saudi Arabia has told the White House it would be willing to boost oil production early next year if crude prices are high - a move aimed at winning goodwill in Congress for a deal in which the kingdom would recognize Israel and in return get a defence pact with Washington, Saudi and US officials said," according to the WSJ article.
Stephen Innes, managing partner of SPI Asset Management, said prices are likely to remain not only elevated but volatile, noting historical analysis suggests that oil prices tend to experience sustained gains after Middle East crises.
"Outside of oil prices, which typically elicit a buy-first-ask-questions-later response to Middle East geopolitical escalations, broader markets should veer risk-off but possibly slide to a more wait-and-see mode to determine if there were puppet masters behind the attack. Particularly Tehran, which could all but guarantee a broader conflagration."
