WASHINGTON (DTN) -- New York Mercantile Exchange oil futures and Brent crude on the Intercontinental Exchange moved mixed early Tuesday as investors assessed the geopolitical risk premium in the oil markets tied to escalating conflict in the Gaza Strip after the Israeli military hit over 200 targets overnight within the besieged enclave.
Israel has made heavy use of air power and shelling from land-based artillery in what Israeli officials called the "first phase of the campaign to dismantle Hamas's military infrastructure". Analysts say Israel could be preparing for the extended ground offensive in the Gaza Strip after it called up 300,000 army reservists and amassed heavy artillery around the borders with Gaza. On Monday, Israel ordered a full siege of the Gaza Strip, cutting around 80% of electricity, water and food supplies. So far, there are no signs the conflict could spread beyond the Israel-Hamas war, with Iran and the Lebanese militant group Hezbollah continuing to deny any involvement in the savage attack over the weekend on Israeli civilians.
Sources say the escalating violence in Gaza is unlikely to have any immediate impact on the availability of oil, but traders are still anxious about the potential risk of a broader conflict in one of the world's biggest crude-producing regions.
The calls are growing from within U.S. Congress to clamp down on Iran's oil exports that have been rising in recent months despite the ongoing sanctions regime. In August, Iran's oil exports climbed to 2 million barrels per day (bpd), according to tanker-tracking data -- the highest level since the United States reinstated sanctions on Tehran in 2018.
Separately, Israel has ordered Chevron to shut down natural-gas production at one of the two major offshore platforms it operates in the Eastern Mediterranean Sea as a safety precaution amid ongoing hostilities. It remains unclear when Chevron would be able to reopen the Tamar platform. Chevron inherited Israel's Tamar and Leviathan gas fields in its $5 billion purchase of Noble Energy in 2020 and has since worked to expand into Egypt and Cyprus.
In other news, the International Monetary Fund in its World Economic Outlook released Tuesday morning, raised U.S. growth projections for this year by 0.3 percentage points compared to its July outlook to 2.1%. IMF hiked next year's forecast for the United States by 0.5 percentage points to 1.5%.
The United States economy has seen stronger business investment and resilient consumption, the IMF's World Economic Outlook says, while euro zone economies have diverged under pressure from higher interest rates. Eurozone growth has been lowered by 0.2% to 0.7%. For China, IMF cut its growth forecast by 0.2% from July outlook to 5%, and for the next year by a sharper 0.3% to 4.2%, citing the ongoing woes in real estate sectors and slowing manufacturing activity. The International Monetary Fund left its global growth forecast unchanged from three months ago at 3% for the year.
"Resilient global economy is still limping along below pre-pandemic trends, with growing divergences." said IMF in its October Global Growth Outlook.
Near 7 a.m. EDT, West Texas Intermediate November futures on the New York Mercantile Exchange softened $0.39 per barrel (bbl) to $86 bbl, and international crude benchmark slipped to $87.74 bbl, down by $0.41 bbl. NYMEX November ULSD futures gained $0.0240 to $2.9906 gallon and front-month RBOB futures were little changed near $2.2376 gallon.
Liubov Georges can be reached at firstname.lastname@example.org