NEW YORK: Oil prices rose more than 3% on Monday, with Brent surpassing $80 per barrel for the first time since August, as the increased risk of a region-wide Middle East war jolted investors out of record bearish positions amassed last month.
Brent crude futures rose by $2.82, or 3.6%, to $80.87 per barrel by 1:36 p.m. ET [1736 GMT]. US West Texas Intermediate futures rose by $2.75, or 3.6%, to $77.13 per barrel.
Last week, Brent rose more than 8% and WTI advanced by more than 9% week-on-week, the most in more than a year, after Iran’s Oct. 1 missile barrage against Israel raised concerns that the response from Israel would aim at Tehran’s oil infrastructure.
If that happens, oil prices could rise by another $3 to $5 per barrel, said Andrew Lipow, president of Lipow Oil Associates.
Rockets fired by Iran-backed Hezbollah hit Israel’s third-largest city, Haifa, early on Monday. A surface-to-surface missile from Yemen at central Israel on Monday was intercepted, the Israeli military said. Israel, meanwhile, looked poised to expand ground incursions into southern Lebanon on the first anniversary of the Gaza war that has spread conflict across the Middle East.
“There is growing concern that (the) conflict may continue to escalate - not only putting Iran’s 3.4 mmbopd (million barrels of oil per day) of production at risk - but creating further disruptions to regional supply,” analysts at Tudor, Pickering, Holt & Co wrote on Monday.
Monday’s gains were likely driven by money managers closing bearish bets on the rising risk of disruption to Middle Eastern oil supplies, UBS analyst Giovanni Staunovo said.
Hedge funds and money managers had amassed record bearish bets in oil futures through mid-September on a reduced outlook for demand, primarily in China, the biggest importer of crude oil.
“Up until a week ago, I had thought we would be testing low $60s in oil,” said Brent Belote, founder of commodities focused hedge fund Cayler Capital.
The demand-side of the equation is still weak, and there is enough spare supply capacity within the Organization of Petroleum Exporting Countries (OPEC) to offset potential losses of Iranian flows, Belote added.