Middle East Tension Pushes Crude Near $50; Oil Embargo Not Likely
Crude oil futures traded higher on Monday, even hitting a three-week high above $49 at one point during trading on the New York Mercantile Exchange. Fears caused by an increase in tension in the Middle East –the source of one-third of the world’s oil– , after Israel ratcheted up its campaign to prevent Hamas from launching rockets by sending ground forces into Gaza, attributed to the recent climb.
U.S. light, sweet crude gained $2.47, or 5.33 percent, to settle at $48.81 a barrel in New York. At one point it touched $49.28 a barrel, the highest since Dec. 15.
An Iranian military commander urged Islamic producers to cut supplies to supporters of Israel in Europe and the United States, the official IRNA news agency reported.
However, a source inside OPEC said that a boycott was not likely to take effect. “There are no plans to do this and I think it is very unlikely,” the source told Reuters.
When asked to comment about the report on Monday, an Iranian foreign ministry spokesman said. “We do support any action for realizing two main steps: an immediate stop to the invasion and an end to the Gaza blockade,” foreign ministry spokesman Hasan Qashqavi said.
Analysts and traders alike believe that the world is different today than it was in 1973 when the famous Arab oil embargo during the Yom Kippur War between Israel and Arab armies led by Egypt and Syria, caused a steep spike in the price of crude oil.
But, as evidenced by the recent prices, traders are beginning to get a little worried now that the conflict has entered its tenth day. Heavy clashes were reportedly taking place between Israel Defense Forces troops and Hamas gunmen late Monday evening in the northern Gaza Strip.
Traders have also been worried about the continuing gas dispute between Russia and Ukraine.