- Oil prices surge in the wake of a surprise Hamas attack on Israel
- November ’23 WTI gains $3.28/Bbl this morning to trade around $86.07/Bbl
- On Saturday, Palestinian group Hamas initiated the largest military assault on Israel in decades, prompting Israel to respond with airstrikes on Gaza
- The conflict poses a risk to U.S. attempts to mediate a peace agreement between Saudi Arabia and Israel, potentially jeopardizing a deal involving normalization of relations and a defense pact
- While currently, there are no immediate impacts on supply and demand, but the situation could have broader geopolitical implications
- Last week, oil prices saw their biggest weekly drop in March, with prompt month Brent and WTI losing $10.73/Bbl and $8/Bbl, respectively
- The decline was driven by factors like a weakened macroeconomic outlook, concerns over higher interest rates for longer, affecting future economic growth, and a strong U.S. dollar
- However, AEGIS believes that such price pullbacks could trigger more proactive discussions within OPEC
- Hamas-Israel tensions cast a shadow over Saudi-Israeli relations (WSJ, Bloomberg)
- Last Friday, Saudi Arabia informed the White House of plans to increase oil production in early 2024 if crude prices stay elevated, aiming to strengthen the three-way agreement with the US and Israel
- However, Saudi negotiators emphasized that production decisions will be guided by market conditions and that these talks do not constitute a long-term commitment to reducing oil prices
- Nevertheless, the growing conflict in Gaza could decrease the probability of a near-future normalization in Saudi-Israeli relations
- Furthermore, the WSJ reported that Iranian security officials helped plan the Hamas assault
- There is a risk that the White House will take a tougher stance on sanctions enforcement, reversing its previously looser approach, which has enabled Iran to raise its oil production by more than 0.5 MMBbl/d this year to reach 3.2 MMBbl/d as of Aug. '23