Oil prices were climbing sharply on Monday in reaction to the attack on Israel by Hamas. Energy stocks rose as traders watched how the conflict is set to affect oil production and transportation in the Middle East.
Brent crude, the global standard, rose 3.1% to $87.19 a barrel in early trading. West Texas Intermediate, the U.S. standard, climbed 3.3% to $85.52. However, prices still remain below levels of more than $90 a barrel reached last week.
The recent drop in prices was largely driven by concerns over demand as rising bond yields sparked concerns over economic growth. However, the surprise attack by Hamas on Israel launched on Saturday will likely focus attention on potential disruption to oil supplies.
U.S.-listed energy stocks were set for a positive open. Among producers,
Exxon Mobil
(ticker: XOM) was up 2.9% in premarket trading,
Chevron
(CVX) was up 2.4%,
ConocoPhillips
(COP) gained 2.8%,
Occidental Petroleum
(OXY) was up 3.2% and
Marathon Oil
(MRO) rose 2.7%.
Oil-services providers also rose with
Halliburton
(HAL) up 2.7% and
SLB
(SLB) –formerly Schlumberger– up 3.2%.
While neither Israel nor Palestine are major oil producers, attention will be on the reactions from Saudi Arabia and Iran –both members of the Organization of the Petroleum Exporting Countries, or OPEC– amid fears of an escalation of the conflict. Saudi Arabia had previously signaled it would be willing to boost oil production amid negotiations over a possible Saudi recognition of Israel in return for U.S. weapons sales and security guarantees, according to The Wall Street Journal.
“The events in Israel over the weekend are unlikely to derail any agreements made between the U.S. and Saudi Arabia,” Benchmark analyst Kurt Hallead wrote in a research note in Monday.
Hallead said he continues to expect Saudi Arabia to keep oil prices in a range of $70 to $90, a “sweet spot” which produces the best returns for oil-services stocks.
The prospect of tighter sanctions on Iran could be a trickier prospect. The Journal reported on Sunday that Iranian security officials helped plan the attack on Israel, citing senior members of Hamas and fellow militant group Hezbollah. A spokesman for Iran’s mission to the United Nations told the Journal that Iran supports Hamas’s actions but didn’t direct them.
Representatives for the Iranian government didn’t immediately respond to requests for comment from Barron’s early on Monday.
“If [reported Iranian involvement] invokes a U.S. response, oil prices could face more upside pressures. Saudi Arabia, however, expressed their willingness to increase production by early next year if oil prices remain high,” analysts at Saxo Bank were in a research note.
Write to Adam Clark at [email protected]
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