Brent gains as conflict in the Middle East takes a fresh turn

The front-month ICE Brent contract gained $0.82/bbl on the day, to trade at $82.38/bbl at 09.00 GMT.

PHOTO: An oil pump jack. Getty Images

Upward pressure:

Brent futures extended gains this week on the back of global supply concerns and escalation of the Israel-Hamas conflict, which has turned into a broader global threat now.

Iran-aligned militant group Hezbollah launched several airstrikes at a town in northern Israel after 10 civilians in southern Lebanon were killed in cross-border hostilities between the two countries, Reuters reported.

Meanwhile, Brent's price gained after the Israel Defense Forces (IDF) launched a ground assault in Gaza’s biggest hospital on Thursday, Reuters reported.

Hopes of a ceasefire between Israel and Hamas for now “does not appear imminent,” said two analysts from ING Bank.

Oil market analysts expect Brent futures to rise further as crude supply is likely to take a hit with the onset of oil-producer group OPEC’s additional voluntary cuts in the first quarter of this year.

Downward pressure:

Brent’s price gains were capped partially after Paris-based International Energy Agency (IEA) cut global oil demand growth forecast in its latest oil market report, diverging significantly from OPEC’s demand growth projections.

The IEA expects global oil demand to grow by 1.22 million b/d this year, slightly lower than its previous estimate. “Today the IEA is again predicting that oil demand growth will slow while OPEC believes the opposite,” Price Futures Group’s senior market analyst commented.

The latest US Consumer Price Index (CPI) has also disappointed the oil market that now expects the US Federal Reserve (Fed) to delay interest rate cuts this year.

Higher US interest rates can reduce global demand for oil as it makes buying costlier for non-dollar currency holders.

By Aparupa Mazumder

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