Oil Rises as Middle East Conflict Deepens, Gains Capped by Global Supply Outlook

The escalating conflict in the Middle East has sent oil prices surging, with Brent crude futures rising by 83 cents to $74.39 a barrel and U.S. West Texas Intermediate (WTI) crude climbing 88 cents to $70.71. This increase follows Iran's launch of over 180 ballistic missiles at Israel, raising concerns about potential supply disruptions from the key oil-producing region. However, gains have been capped by the global supply outlook, with analysts expecting no policy changes from the OPEC+ panel meeting scheduled for later today.


The direct involvement of Iran, a major oil producer and OPEC member, in the conflict has raised prospects of disruptions to oil supplies. Iran's oil output reached a six-year high of 3.7 million barrels per day in August, further emphasizing its significance in the global oil market. However, the potential impact on oil prices is tempered by the current weak demand due to a slowing global economy and record-high U.S. production.


The OPEC+ panel meeting, which includes Russia, is expected to review the market without any policy changes. From December, OPEC+ is set to raise output by 180,000 barrels per day (bpd) monthly. Any suggestion that production hikes will proceed could offset concerns of supply disruptions in the Middle East, as highlighted by ANZ Research.

The mixed U.S. stockpile data, with crude oil and distillate inventories falling while gasoline inventories rose, adds to the uncertainty in the oil market. As the conflict in the Middle East continues to unfold, investors will closely monitor the situation, weighing the potential impact on global oil supply and demand against the broader economic outlook.