Brent Futures Top $90 after Israel Broadens Gaza Invasion

Liubov Georges
By  Liubov Georges , DTN Energy Reporter

WASHINGTON, D.C. (DTN) -- International crude benchmark Brent futures for December delivery settled above $90 a barrel (bbl) on Friday in reaction to an announcement from Israel that its military was expanding a ground invasion into the Gaza Strip. Reports indicate a total communication blackout in the besieged enclave, while the United States boosted the deployment of military personnel and missile defense systems in the Middle East.

The U.S. Pentagon said Friday that around 900 U.S. troops have been or are ready to be deployed to the Middle East as the Israeli military concluded the second day of overnight raids in northern Gaza. Israel Defense Forces spokesperson Daniel Hagari reiterated at a news conference in Tel Aviv that civilians in northern Gaza must leave for the southern part of the Strip as military forces are now expanding their activity on the ground.

Traders pushed Brent and West Texas Intermediate futures more than $2 bbl higher Friday on the increased likelihood that a large Israeli ground incursion into Gaza appears inevitable with the potential for further escalation. Crude futures traded in wide price swings this week as the geopolitical risk premium modulated earlier in the week on a viewpoint Israel was reconsidering a large ground invasion amid pressure from allies.

Brent crude rallied overnight Thursday following news the U.S. carried out targeted airstrikes against two facilities in eastern Syria used by Iran-affiliated militant groups in what it called "retaliatory" strikes for recent attacks on American troops in the region.

Iran continues to ratchet up tensions in the Middle East, having begun a two-day military exercise in the central province of Estefan to test the readiness of troops and equipment, according to Iran's state television reports.

In financial markets, investors are also positioned ahead of next week's Federal Open Market Committee meeting on monetary policy, with market consensus heavily leaning towards no change in the federal funds rate that currently stands at a 22-year high 5.25% to 5.5% target range. The focal point of the Nov. 1 rate announcement will be what signal that Fed Chairman Jerome Powell sends to markets about the future of the monetary policy path.

The Fed's meeting takes place against a backdrop of exceptionally strong macroeconomic data and persistent inflation that continues to drag on key pockets of the economy such as housing and services.

Bureau of Economic Analysis said Thursday the U.S. economy expanded at a robust 4.9% annualized rate during the third quarter, up from a 2.1% growth rate estimated for the April-June period and a tepid 0.9% expansion for the first three months of the year.

What's notable is that the increase in consumer spending during the third quarter partly reflects demand rotation from services to goods, which should be supportive of manufacturing activity in the coming months. Supporting this view, U.S. durable goods orders spiked 4.7% in September -- more than double the 2% increase expected by economists.

At settlement, New York Mercantile Exchange West Texas Intermediate futures for December delivery advanced to $85.54 bbl, up $2.33, and international crude benchmark Brent for December delivery on Intercontinental Exchange rallied $2.55 to $90.48 bbl. NYMEX November ULSD futures added $0.0080 to $3.0519 gallon, while front-month RBOB futures moved up $0.0564 for a $2.3125 gallon settlement.

Liubov Georges can be reached at liubov.georges@dtn.com

Liubov Georges