Crude Oil Rises Above $40 as Gaza Situation Continues
Crude oil futures rose in New York trading on Monday amid concern that the ongoing war in Gaza may disrupt Middle East crude supplies.
Crude oil for February delivery rose $2.31, or 6.1 percent, to settle at $40.02 a barrel on the New York Mercantile Exchange. Earlier in the day, it touched $42.20 a barrel in the biggest gain in two weeks.
Futures have declined 73 percent from a record $147.27 a barrel in July.
Israeli aircraft attacked Hamas targets in Gaza on the third day of an offensive that has killed more than 300 Palestinians in retaliation for ongoing rocket fire originating from Gaza directed at Israeli towns and cities.
Israeli Defense Minister Ehud Barak said that his country is fighting a “war to the death” with Hamas.
The latest violence has heightened concern that Middle East supplies of crude oil may be cut off. Iran, Hamas’s main backer, holds the world’s second-largest oil reserves.
But others don’t see the current fighting as much of a threat to the world’s oil supply.
“As tragic as the situation is, it is somewhat irrelevant to the price of crude unless the conflict expands,” says Tom Kloza, Chief Oil Analyst at the Oil Price Information Service. “If Arab and Israeli-aligned countries choose up sides, it’s a big deal. But that has only happened a couple of times in 40+ years and there probably have been two dozen or so incidents that measure up to the ongoing violence.”
Another factor in today’s rise in oil prices can be attributed to China, the world’s second-biggest energy consumer, announcing that it will supplement its emergency oil stockpiles while prices are low.
Signs that OPEC member nations are complying with their latest agreed upon output cut are also beginning to affect the market.
Libya announced that it will exceed its required production cut, and from the start of January will curb output by 270,000 barrel per day.
Abu Dhabi National Oil, the UAE’s main producer, said it would cut January and February oil exports by much more than some refiners had expected.