Oil prices extended gains on Friday as reports claimed that Iran is preparing to attack Israel before the US elections next week.
Israeli intelligence suggested that Iran is preparing to attack Israel from Iraqi territory in the coming days, possibly before the US presidential election, Axios reported on Thursday.
The attack is expected to be carried out using a large number of drones and ballistic missiles, according to the report.
Iran and Israel have been engaging with each other over the last month in carrying out drone strikes.
Further escalations in the region could put the oil supply at risk as Iran produces about 3.3 million barrels per day of crude oil, according to data from the Organization of the Petroleum Exporting Countries.
At the time of writing, the price of West Texas Intermediate crude oil was at $71.30 per barrel, up 2.9% from the previous close.
Brent crude oil on the Intercontinental Exchange was at $74.70 per barrel, up 2.6%.
Fxempire.com said in a report:
Oil prices climbed over $1 per barrel on Friday, partially offsetting weekly losses as geopolitical tensions in the Middle East fueled concerns about potential supply disruptions.
Crude oil supply risks
If Iran attacks Israel, it will further escalate tensions between the two countries. Israel had carried out strikes on Iran’s military targets on Saturday.
This was in response to Iran’s attack on Tel Aviv on October 1.
The market was concerned that Israel may hit oil and nuclear facilities in Iran. However, the limited strike over the weekend alleviated concerns over supply disruptions.
The latest development, though, could once again bring fears about supply disruptions to the forefront.
If Iran attacks Israel, the latter may retaliate by targeting oil facilities.
Iran produces over 3 million barrels per day of oil and is responsible for about 4% of the world’s oil supply.
China is the main importer of Iranian oil.
OPEC+ decision boosts oil prices
Earlier this week, reports claimed that OPEC+ could delay their planned hike in oil production from December.
The cartel is expected to increase oil production by 180,000 barrels per day from December as part of a plan to reverse its voluntary output cuts.
Saudi Arabia, the de facto leader of the group, had earlier hinted about its desire to regain market share at the expense of lower oil prices.
However, global prices had fallen below $70 per barrel after Israel’s limited attack on Iran. This made things complicated for OPEC as most of its members depend on oil exports.
Oil price forecast
The WTI oil price is trading above its immediate resistance of $71.24 per barrel. According to Fxempire, if prices breach $71.81, the US benchmark could strengthen further around $72.31 per barrel.
“On the downside, the first line of support sits at $70.13, with additional support at $69.48 and $68.92 if sellers step in,” Arslan Ali, author at Fxempire.com.
The 50-day EMA at $69.19 offers underlying support, while the 200-day EMA near $70.17 aligns closely with current levels, signaling indecision.
Brent prices are also trading above its immediate resistance of $74.73 per barrel. The next targets are $75.10 and $75.53.
“On the downside, initial support sits at $73.56, with deeper levels at $72.99 and $72.39 if prices begin to retrace,” Ali said.
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