A Nairametrics review of global crude prices on Wednesday, October 18, revealed that Brent crude was holding at $91 per barrel.
At precisely 6:05 AM (GMT+1), Brent crude was $91.75, West Texas Intermediate (WTI) was $88.69 per barrel, and Bonny Light was $91.81 per barrel.
The rise in Brent crude is due to the escalating conditions of the Israel-Hamas conflict, as Dr. Ashraf Al-Qudra, the spokesperson for the Palestinian Ministry of Health, confirmed a devastating blast in Gaza that claimed hundreds of lives on Tuesday, October 17, with the victims mostly being children and women.
The incident occurred during ongoing Israeli airstrikes, with Palestinian officials attributing the tragedy to the airstrikes, while Israel Defense Forces (IDF) denied targeting the hospital and held Hamas, a Palestinian Islamic Jihad group responsible for a “failed rocket launch” hitting the hospital.
Oil traders have concerns over the escalating conditions in the Middle East, which could very well affect crude oil markets, hence increasing oil prices.
Meanwhile, the Middle East, responsible for over a third of the world’s seaborne oil trade, is experiencing a significant rise in geopolitical risks.
This has sent shockwaves through the financial markets. Although there hasn’t been a direct impact on physical oil supply as of now, market volatility is expected to persist as the crisis continues to evolve.
The ongoing conflict in the Middle East is characterised by uncertainty and rapidly evolving events.
Amid this scenario, the oil markets, which were already delicately balanced according to International Energy Agency (IEA) forecasts, are garnering intense attention from the international community.
The focus is primarily on monitoring potential disruptions to the region’s oil flows, underscoring the importance of stability and uninterrupted trade in this critical global energy hub.
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The impact of the Israel-Hamas conflict extends beyond the main parties involved. It has disrupted United States-mediated talks on Saudi-Israel relations, heightened tensions between Israeli forces and Iran-backed Hezbollah near Lebanon, and raised concerns about potential Iranian involvement.
Global market analyst JPMorgan warns that while no direct evidence of similar actions exists currently, a broader conflict could disrupt vital shipping routes like the Strait of Hormuz, responsible for 20% of global oil consumption, posing significant challenges. Looking at this insight from JPMorgan, other oil-producing nations may intervene to mitigate the repercussions.
That possibility also raises questions about capacity. Using Nigeria as a case study, the country currently battles crude oil theft on its local front and has no capacity to meet its 1.7 million barrels per day assigned quota from the Organisation of Petroleum Exporting Countries (OPEC).
The expectation that the country will increase its quota before 2023 ends is slim due to the fact that crude oil theft is still a very present threat to oil production.
