Oil edged up as traders assessed whether an Israeli attack in Qatar that escalated the conflict in the Middle East, the source of about a third of the world’s supplies, would imperil crude flows from the region.
West Texas Intermediate climbed 0.6% to approach $63 a barrel after the Israel Defense Forces conducted a strike in Doha targeting the senior leadership of Hamas, which has been declared a terrorist group by the US and Europe. The leaders targeted by the strike, including Khalil al-Hayya, survived, according to Al Jazeera.
The strike is the first Israeli attack in Doha since the beginning of the nearly two-year long conflict that has roiled global oil markets. The incident stands to jeopardize US efforts to reach a peace deal between Israel and Hamas, which could have siphoned any remaining Middle East risk premium out of crude. Israel said it takes full responsibility for the attack and that it was a “wholly independent” operation.
Qatar has reinforced its role as an international middleman throughout the Israel-Hamas conflict, at one point helping to mediate a short-lived ceasefire between the warring sides. Doha also has drawn criticism from Israeli and American leadership for its willingness to host Hamas’ political bureau.
Oil’s underwhelming reaction to the armed conflict between Israel and Iran in June foreshadowed that Tuesday’s rally wouldn’t last, said Karen Young, a senior research scholar at Columbia University’s Center on Global Energy Policy.
“We’ve really disaggregated regional conflict risk from oil price until there is an escalation that directly targets oil infrastructure or movement,” she said. However, “this is going to have long-term ramifications on Israel’s ability to have regional partners, particularly in energy deals.”
Elsewhere, Ukraine is forging ahead with a military campaign targeting Russia’s energy infrastructure, striking part of the Kuibyshev-Lysychansk oil pipeline overnight. Kyiv’s drone strikes are starting to take a toll on Russian industry, with the Kremlin reporting depressed refinery run rates in September in the aftermath of the attacks.
The trading session briefly shifted the focus from OPEC’s plans to bring back idled production faster than initially planned, which have spurred expectations of a glut that’s already underway by some measures. Crude is down about 13% this year and has traded between $62 to $66 for most of the past month.
Oil had already climbed on Tuesday before the Israeli strike, following equities higher amid mounting expectations the Federal Reserve will lower borrowing costs. US stocks have since pared gains.
“We expect WTI to drop back into the high-$50s territory in the coming months if risk appetite wanes and shale supply surprises to the upside,” said Bart Melek, head of commodity strategy at TD Securities.
Oil Prices
WTI for October delivery rose 0.6% to settle at $62.63 a barrel in New York.
Brent for November settlement advanced 0.6% to settle at $66.39 a barrel.
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