Oil prices jump as Middle East tensions escalate

1 Mar 2024 , 11:08 AM

The tensions rise in Middle East over delayed negotiations on a possible truce in Gaza, and oil prices increased on Friday and were expected to finish the week somewhat higher.

April delivery of Brent futures increased by 29 cents, or 0.4%, to $82.20 per barrel, while U.S. West Texas Intermediate (WTI) increased by 22 cents, or 0.3%, to $78.48.

WTI is expected to rise by 4% this week, while Brent is remaining close to the settlement price from the previous week. With attacks on Red Sea shipping traffic, the Middle East crisis has had little effect on crude flows throughout the past three weeks, since Brent has been steadily above $80.

Reportedly, Israeli troops were opening fire on civilians in Gaza who were waiting for food aid. President Joe Biden said that the United States was investigating the accusations and that he thought this would make peace negotiations more difficult. Israel has said that people gathered around the relief vehicles caused the killings and that people ran over or tramped on the dead. 

Prior to the events of Thursday, Israel and Hamas had expressed a significant divide in their discussions to finalize the terms of a 40-day ceasefire in the Gaza conflict in Qatar. According to Qatari mediators, there hasn’t been any progress and the most difficult problems are still unsolved. 

In other news, an official factory survey released on Friday revealed that China’s manufacturing activity shrank in February for the fifth consecutive month. This puts more pressure on Beijing authorities to implement more stimulus measures as factory owners struggle to find work.

Additionally, January inflation was in line with economists’ estimates according to the U.S. personal consumption expenditures (PCE) index, which is the preferred inflation gauge used by the U.S. Federal Reserve. This kept the possibility of a June interest rate cut open.

According to a Reuters survey, the Organization of Petroleum Exporting Countries (OPEC) increased its supply by 90,000 barrels per day (bpd) from January to 26.42 million bpd this month. Libya’s output increased by 150,000 bpd month over month.

The average price for the front-month contract this year is expected to be $81.13 barrel, according to a Reuters survey of 40 economists and analysts.

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