Oil prices rose more than 5% on Friday as investors remained on edge about escalating geopolitical tensions in the Middle East.
International benchmark Brent crude futures with December expiry traded 5.1% higher at $90.3 per barrel, Front-month November U.S. West Texas Intermediate crude futures rose 5% to trade at $87.1 per barrel on track for the best day since April 3.
WTI crude has gained 4.2% this week, on pace to post its biggest weekly gain since Sept. 1.
The Israel-Hamas conflict has ratcheted up concerns that the fighting may affect regional energy production. The Middle East accounts for more than one third of global seaborne trade.
The International Energy Agency on Thursday described market conditions as “fraught with uncertainty” but said the Israel-Hamas war had not yet had a direct impact on physical supply.
The IEA sought to assuage market concerns by saying it stands ready to act to ensure markets remain “adequately supplied” in the event of an abrupt supply shortage.
The energy agency’s response includes member countries releasing emergency stocks and/or implementing demand restraint measures. Israel is not a major oil producer and no major oil infrastructure runs close to the Gaza Strip.
U.S. sanctions
The U.S. on Thursday tightened sanctions against Russian crude exports, restricting two shipping companies that it said violated the G7′s oil price cap, a mechanism designed to retain a reliable supply of Russian flows in the market while curbing the Kremlin’s war chest.
“Enforcing our sanctions is central to our effort to limit Russia’s profits on its oil trade. The price cap is designed to keep Russian oil flowing while imposing new costs on Russia, not to reduce oil supply,” a Treasury spokesperson told CNBC via email.
“Indeed, oil prices fell in the hours following the announcement. Of course, oil prices are sensitive to many factors, including ongoing conflict in the Middle East,” they added.
The G7, Australia and the EU implemented a $60-per-barrel price cap on Russian oil on Dec. 5 last year. It came alongside a move by the EU and U.K. to impose a ban on the seaborne imports of Russian crude oil.
Together, the measures were thought at that time to reflect by far the most significant step to curtail the fossil fuel export revenue that is funding Russia’s war in Ukraine.
Prospect of Israel-Hamas war spillover is a ‘major concern’ for oil markets, IEA says
On Thursday, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) said it was imposing sanctions on two owners of tankers carrying Russian oil priced above the price cap: one in Turkey and one in the United Arab Emirates.
The YasaGolden Bosphorus tanker, which is owned by Turkey-based Ice Pearl Navigation Corp, was said to have carried crude oil priced above $80 a barrel after the price cap took effect.
Meanwhile, OFAC said the SCF Primorye, which is owned by UAE-based Lumber Marine SA, carried Russian oil priced above $75 a barrel from a port in Russia after the price cap mechanism came in.
The move to clamp down on Russian oil sales “demonstrates our continued commitment to reduce Russia’s resources for its war against Ukraine and to enforce the price cap,” said Deputy Secretary of the Treasury Wally Adeyemo.
“We remain committed to implementing a price cap policy that has two goals: reducing the oil profits upon which Russia relies to wage its unjust war against Ukraine and keeping global energy markets stable and well-supplied despite turbulence caused by Russia’s unprovoked invasion of Ukraine,” Adeyemo added.
Source: CNBC
