Oil Prices Touch 4-Week High Amid Middle East Tensions

Crude oil prices went up again on Wednesday as traders factored in growing concerns about violence in the Middle East.

Key Facts

  • The international benchmark Brent crude rose by 2.7% to about $75.50 per barrel by midmorning, while the U.S. benchmark, West Texas Intermediate (WTI), increased 3% to $72 per barrel.
  • This is the highest price for Brent since September 3 and for WTI since September 24.
  • Brent has risen more than 5% this week and WTI nearly 6%, as oil traders respond to escalating tensions in the Middle East, including missile strikes from Iran on Israel and Israel’s killing of Hezbollah’s leader, Lebanon’s ruling party.

Contra

Despite the recent rise, oil prices are still much lower than they were this summer. Brent is down 14% from its July peak and far below the over $100 per barrel price it held for much of 2022 after Russia’s invasion of Ukraine.

Crucial Quote

“While the geopolitical risk premium rose on Tuesday…this premium remains moderate,” said Goldman Sachs oil strategist Yulia Zhestkova Grigsby in a Wednesday note to clients. She added that this is “likely” because of a generally favorable outlook for production.

Key Background

Crude oil prices most directly make their way to consumers as they heavily influence gasoline prices, but they also can lead to higher prices across the board as higher production costs make their way to final prices of goods. The climb in oil prices may throw a wrench in the Federal Reserve’s inflation fight, but the volatile commodity is still well within its normal range of the last year, amid demand concerns from China, the top oil consumer outside of the U.S., and a proposed increase in production from Saudi Arabia, the top oil producer in the Middle East.

Published: 2nd October 2024

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