By John Ikani
Brent crude stands firm at $91 per barrel following a review of global crude prices on Wednesday.
Widely regarded as a benchmark, Brent crude is used as a reference point for pricing other crude oils around the world. It is the most widely traded crude oil benchmark, and it is used to price around two-thirds of the world’s oil.
Brent crude is a high-quality, light, sweet crude oil that is relatively easy to refine into gasoline and other products. It is also relatively easy to transport, as it is produced offshore and can be loaded onto tankers.
At precisely 6:05 AM (GMT+1), Brent crude clocked in at $91.75, while West Texas Intermediate (WTI) recorded $88.69 per barrel, and Bonny Light came in at $91.81 per barrel.
The upsurge in Brent crude prices can be attributed to the intensification of the Israel-Hamas conflict. Dr. Ashraf Al-Qudra, spokesperson for the Palestinian Ministry of Health, confirmed a tragic explosion in Gaza on October 17, resulting in the loss of hundreds of lives, predominantly women and children.
This devastating incident took place amidst ongoing Israeli airstrikes. While Palestinian officials hold the airstrikes responsible, the Israel Defense Forces (IDF) refuted targeting the hospital, attributing the tragedy to a “failed rocket launch” by Hamas, a Palestinian Islamic Jihad group.
The escalation of Middle East tensions is raising concerns among oil traders, who anticipate potential impacts on crude oil markets, thus leading to increased oil prices.
Notably, the Middle East, which accounts for more than a third of global seaborne oil trade, is facing heightened geopolitical risks, causing ripple effects in financial markets. While there’s no immediate disruption to physical oil supply, market volatility is expected to persist as the crisis unfolds.
The ongoing Middle East conflict is marked by uncertainty and rapidly evolving developments.
In the midst of this, global attention focuses on the oil markets, which were already finely balanced according to forecasts from the International Energy Agency (IEA). The primary concern is monitoring potential disruptions to oil flows in the region, underscoring the significance of stability and unimpeded trade in this vital global energy hub.
The repercussions of the Israel-Hamas conflict extend beyond the primary parties involved. These tensions have disrupted U.S.-mediated discussions on Saudi-Israel relations, heightened conflicts between Israeli forces and Iran-backed Hezbollah near Lebanon, and sparked concerns about potential Iranian involvement.
Global market analysts at JPMorgan caution that, although there is currently no direct evidence of such actions, a broader conflict could disrupt critical shipping routes like the Strait of Hormuz, responsible for 20% of global oil consumption, posing significant challenges. In light of this perspective from JPMorgan, it is plausible that other oil-producing nations may step in to mitigate the consequences.
This prospect also raises questions about capacity. Taking Nigeria as a case study, the nation is currently grappling with crude oil theft on its home front and lacks the capacity to meet its OPEC-assigned quota of 1.7 million barrels per day.
The likelihood of Nigeria increasing its quota before the end of 2023 is slim, given the persistent threat of crude oil theft affecting oil production.