Summary
- Brent and WTI benchmarks up more than 2%
- War risk continues to underpin market
- IEA global oil supply forecast revised upwards
(Reuters) – Oil prices were driven higher on Tuesday by the Iran-Israel conflict, though major oil and gas infrastructure and flows have so far been spared from substantial impact.
Brent crude futures gained $1.56, or 2.1%, to $74.79 a barrel by 1202 GMT. U.S. West Texas Intermediate crude was up $1.42, or nearly 2%, at $73.19.
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Both contracts rose more than 2% early in the session but also retreated in volatile trade before bouncing back.
While there was no noticeable interruption to oil flows, Iran partially suspended gas production at the South Pars field that it shares with Qatar after an Israeli strike started a fire there on Saturday. Israel also hit the Shahran oil depot in Iran.
“The market is largely worried about disruption through (the Strait of) Hormuz, but the risk of that is very low,” said Saxo Bank analyst Ole Hansen.
There is no appetite for closing the waterway, given that Iran would lose revenue and the U.S. wants lower oil prices and lower inflation, Hansen added.
Two oil tankers collided and caught fire on Tuesday near the Strait of Hormuz, where electronic interference has surged, highlighting the risks to companies moving oil and fuel supplies in the region.
Despite the potential for disruption, there are signs oil supplies remain ample amid expectations of lower demand.
In its monthly oil report on Tuesday, the International Energy Agency revised its world oil demand estimate downwards by 20,000 barrels per day (bpd) from last month’s forecast and increased the supply estimate by 200,000 bpd to 1.8 million bpd.
Investors were also focused on central bank interest rate decisions, PVM Associates analyst Tamas Varga said in a note, with the U.S. Federal Open Market Committee set to discuss rates later on Tuesday.
Reporting by Seher Dareen in London, Anjana Anil in Bengaluru and Jeslyn Lerh in Singapore Editing by David Goodman
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