Oil News: Rough Rallies as Iran-Israel Tensions Threaten Supply

Geopolitical tensions escalate with a potential conflict between Iran and Israel

The rise in oil prices comes at a time of rising geopolitical tensions due to reports suggesting Iran could carry out retaliatory attacks on Israel. Citing Israeli intelligence, sources indicate that Iran is mobilizing drones and ballistic missiles in Iraq, with a possible attack expected before the US presidential elections on November 5. This increases the risk of further hostilities in the Middle East, as observed by Ole Hvalbye of SEB Research. , which pointed to the likelihood of an escalation that could disrupt oil markets. While Israel and Iran have shown restraint in recent clashes, any military escalation could further push up oil prices as traders consider possible supply disruptions.

OPEC+ may postpone production increases due to uncertainty about demand

In addition to the positive sentiment, expectations are growing that OPEC+ could postpone its planned oil production increase, which was initially scheduled for December. Several OPEC+ sources report concerns about fragile oil demand and higher supply levels, suggesting the potential slowdown could be extended by a month or more. OPEC+ members could finalize this decision as early as next week, which would support current price levels as the market anticipates tighter supply.

Mixed market factors: weekly losses despite risk in the Middle East

Despite Friday’s gains, oil prices are on track for a weekly decline of more than 1%, following a 6% drop earlier this week after Israel’s attack on Iranian military assets on October 26 left energy and nuclear infrastructure intact. Both Iran and Israel have shown restraint, with retaliation limited to demonstrations of strength rather than large-scale conflict, Hvalbye said.

However, uncertainty ahead of the US presidential election and the Chinese National People’s Congress (NPC) Standing Committee meeting next week could impact market sentiment, noted IG analyst Tony Sycamore, as shifts in US policy towards regarding Iran and Russia may remain possible, depending on the election results. .

The recovery of China’s manufacturing sector is creating demand optimism

Another supportive factor was that China’s manufacturing sector showed signs of growth in October, driven by recent stimulus measures. Private sector surveys showed a return to expansion for the first time in six months, consistent with data from official sources.

This revival suggests that the Chinese economy could support global oil demand in the coming months, although Goldman Sachs analysts warn that Chinese growth is likely to focus on domestic consumption given reduced infrastructure and housing activity.