Oil Updates — crude up as investors weigh chance of US intervention in Iran-Israel conflict
BEIJING: Oil prices rose on Thursday after President Donald Trump gave mixed signals on potential US involvement in the Israel-Iran conflict, while the Federal Reserve left interest rates unchanged.
Brent crude futures rose 0.69 cents, or 0.9 percent, to $77.39 a barrel by 10:21 a.m. Saudi time, after gaining 0.3 percent in the previous session when high volatility saw prices fall as much as 2.7 percent.
US West Texas Intermediate crude for July was up 0.84 cents, or 1.12 percent to $75.98 a barrel, after settling up 0.4 percent in the previous when it dropped as much as 2.4 percent.
The July contract expires on Friday and the more active August contract was down 8 cents, or 0.11 percent, to $73.42 a barrel.
There is still a 'healthy risk premium baked into the price as traders await to see whether the next stage of the Israel-Iran conflict is a US strike or peace talks,' Tony Sycamore, market analyst at IG, said in a client note.
Goldman Sachs on Wednesday said a geopolitical risk premium of about $10 a barrel is justified given lower Iranian supply and risk of wider disruption that could push Brent crude above $90.
Trump on Wednesday told reporters that he may or may not decide whether the US will join Israel in its attacks on Iran. The conflict stretched into its seventh day on Thursday.
Direct US involvement would widen the conflict, putting energy infrastructure in the region at higher risk of attack, analysts said.
As a result of the unpredictability that has long characterised Trump's foreign policy, 'markets remain jittery, awaiting firmer signals that could influence global oil supply and regional stability,' said Priyanka Sachdeva, senior market analyst at Phillip Nova.
Iran is the third-largest producer among members of the Organization of the Petroleum Exporting Countries, extracting about 3.3 million barrels per day of crude oil.
About 19 million bpd of oil and oil products move through the Strait of Hormuz along Iran's southern coast and there is widespread concern the fighting could disrupt trade flows.
Separately, the US Federal Reserve kept its interest rates steady on Wednesday but pencilled in two cuts by the end of the year. Chair Jerome Powell said cuts would be 'data-dependent' and that it expects accelerated consumer inflation from Trump's planned import tariffs.
Lower interest rates would stimulate the economy, and as a result demand for oil, but that could exacerbate inflation.
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