Oil prices have regained their upward trajectory after starting the week on a downward trajectory, as the market waits to see whether Israel will respond to Tehran over its missile attack last week, after US President Joe Biden refused to strike Iranian crude oil fields.
Brent crude rose to $78.19 a barrel, after hitting its highest since January 2023 last week, while West Texas Intermediate crude was at $74.63 a barrel. Biden said on Friday he did not know when Israel would respond, but would consider alternatives to striking oil fields.
Iran’s attack on Israel has raised concerns about a full-scale war in the Middle East, prompting a flurry of moves in the options market. However, questions about the demand outlook — particularly from top importer China — and oversupply still linger in the market.
The Middle East remains on edge, with Israel sending troops into northern Gaza over the weekend and continuing airstrikes and limited ground maneuvers in Lebanon. Iranian oil production is back to near full capacity and could be at risk as tensions escalate.
The market is in a waiting game now as traders await clarity on developments in the Middle East, said Yip Jun Rong, a market strategist at IG Asia in Singapore. Any hit to Iran’s energy infrastructure could send Brent prices above $80, Rong said.
Oil options markets continue to maintain their bullish call bias — which buyers benefit from when futures rise. Brent’s implied volatility gauge was near its highest level in nearly a year, while money managers added more net long positions in Brent crude.
Goldman Sachs Group Inc. expects Brent crude to rise to $90 if Iranian oil supplies are disrupted, according to a note from analysts including Dan Struyven.
Meanwhile, Saudi Arabia raised the price of its main crude for buyers in Asia by more than expected, while simultaneously cutting prices for all grades exported to the US and European markets.
China’s top economic planner is scheduled to hold a news conference on Tuesday to discuss a package of policies aimed at boosting economic growth, according to a government notice on Sunday. Expectations are growing among analysts that Beijing will expand public spending as part of the stimulus package.
