Oil prices plunged on Thursday, after the Organization of the Petroleum Exporting Countries (OPEC) did not appear to support Iran’s call for an oil embargo on Israel and as the US announced plans to ease sanctions on Venezuela to increase global oil supplies. This led to a reversal of gains made in the previous session, as the market weighed the prospect of increased global supplies against ongoing geopolitical tensions.
Brent crude futures for December fell 74 cents to $90.76 a barrel, while US West Texas Intermediate (WTI) futures for November, due to expire on Friday, dropped 57 cents to $87.75 per barrel. The more active December WTI contract fell 51 cents to $86.76 a barrel.
Oil prices rose 2 per cent in the previous session after Iran called for an oil embargo on Israel and the US reported a larger-than-expected inventory draw, adding to the already tight supply. However, OPEC sources stated that the organisation is not planning to take any immediate action on Iran’s call, helping to ease concerns over potential disruptions to global oil flows.
RBC Capital Markets noted that while OPEC is not likely to support Iran’s call for an oil boycott of Israel, oil could still play a role in the conflict in several ways. This includes the potential for increased security costs, logistical disruptions, and possible retaliatory attacks on energy infrastructure.
Analysts believe oil prices could be affected by these factors, and the market will continue to monitor the situation closely.
According to Citi analysts, Israel imports about 250,000 barrels per day (bpd) of oil, mainly from Kazakhstan, Azerbaijan, Iraq, and African countries. While an embargo from Kazakhstan and Azerbaijan is unlikely, analysts noted that a disruption in oil supplies to Israel could still have an impact on global oil prices, given the country’s role as a key player in the region. It is unclear what effect any potential disruptions would have on the market, but the situation will continue to be closely monitored, they noted further.
Venezuela’s oil could potentially ease global oil prices, which have risen in recent months due to geopolitical and market factors. However, Venezuela’s oil production has been affected by years of sanctions, and it would need investments to increase output. While Venezuelan oil could provide some relief for global oil markets, there are a number of uncertainties that could affect its ability to do so.