Brent Hits $93 as Middle East Strife Heightens Supply Concerns

Credit: H-AB Photography/AdobeStock
Credit: H-AB Photography/AdobeStock

Global oil benchmark Brent hit $93 a barrel on Wednesday as the risk of escalating conflict in the Middle East threatened to disrupt oil supplies from the region, with Iran calling for an oil embargo to be imposed on Israel.

Brent crude futures was up $2.54, or 2.8%, to $92.44 a barrel at 1056 GMT. West Texas Intermediate crude (WTI) futures were up $2.54, or 2.9%, at $89.2 a barrel.

Both benchmarks gained more than $3 to touch their highest levels in two weeks earlier in the session.

Markets factored in risk premiums after hundreds of Palestinians were killed in a blast at a Gaza City hospital on Tuesday that Israeli and Palestinian officials blamed on each other.

Jordan then cancelled a summit it was to host with U.S. President Joe Biden and Egyptian and Palestinian leaders. Biden arrived in Israel on Wednesday, pledging solidarity in its war against Hamas, and backing its account that the Gaza hospital blast had been caused by militants. 

"This turn of diplomatic fortunes again garners fear of conflict spread and therefore the leap in oil," said John Evans of oil broker PVM.

Elsewhere in the Saudi city of Jeddah, Iranian Foreign Minister Hossein Amirabdollahian urged members of the Organisation of Islamic Cooperation to impose an oil embargo on Israel. 

OPEC+ is not planning to take any immediate action on Iran's call, two sources from the producer group told Reuters.    

"A long occupation looms as the scenario that pushes Brent oil futures above $US100/bbl because it raises the risk that the Israel Hamas conflict expands and potentially draws in Iran directly," added Vivek Dhar, an analyst at Commonwealth Bank of Australia. 

Geopolitical tensions aside, other drivers are also supporting oil prices. 

U.S. crude stocks fell by a much-steeper-than-expected 4.4 million barrels in the week ended Oct. 13, compared to the forecast of a 300,000 barrel fall, according to market sources citing American Petroleum Institute figures on Tuesday. API/S

Official U.S. government data is due later on Wednesday. 

On the demand side, China's economy grew faster-than- expected in the third quarter, official data on Wednesday showed, suggesting a recent flurry of policy measures is helping to bolster a tentative recovery.

Data also showed that the country's oil refinery throughput in September hit a record daily rate, up 12% from a year earlier, as refiners increased run rates to cater for strong demand for transport fuel over the Golden Week holiday and improving manufacturing activity.

But analysts sounded caution on China's economy, with the country's real estate sector still in peril.  

"The economic recovery is still in its infancy," Moody's Analytics economist Harry Murphy Cruise said.

Meanwhile, higher-than-expected September U.S. retail sales spurred expectations of another interest rate hike by year-end. Interest rate hikes to curb inflation can slow economic growth and reduce oil demand. 

(Reuters - Reporting by Natalie Grover, Arathy Somesekhar and Muyu Xu; editing by Lincoln Feast, Jason Neely, Elaine Hardcastle)

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