Oil Futures Surge in MOC Trade as Mideast Tensions Flare

Brian L Milne
By  Brian L. Milne , DTN Refined Fuels Editor

CRANBURY, N.J. (DTN) -- After listless trade throughout most of Thursday's session, nearest delivered oil futures on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange surged, as traders brace for a potential escalation in violence in the Middle East after this week's missile strike in Damascus that killed two Iranian generals and several senior members of the Islamic Revolutionary Guard Corps.

Iranian President Ebrahim Raisi said the attack "will not go unanswered," according to the Wall Street Journal, with WSJ noting Israel did not take credit for the attack. The high-profile killings crossed a threshold, potentially moving the shadow war between the adversaries into open conflict, said several analysts.

West Texas Intermediate and Brent futures rallied on Tuesday following the Monday attack but backed off gains on Wednesday following an unexpected build in U.S. crude stock levels as exports slowed. The listless trading ended Thursday afternoon following rumblings of Iran's determination for revenge, with Reuters reporting Israel's army canceled leave for all combat units and mobilized additional troops for air defense. Israel's government said it is prepared for every scenario, according to Reuters.

Analysts note Tehran has sought to avoid direct conflict with Israel, fearing not only Israeli attacks in Iran but also out of concern in drawing the United States into the conflict. Instead, Tehran has used proxies including Hezbollah and Hamas to menace Israel.

ICE June Brent futures pushed above $90 bbl, rallying to a $91.30 bbl 23-week high on the spot continuous chart before settlement at $90.65 bbl, up $1.30. May WTI futures also rallied to a 23-week high on a spot continuous basis, reaching $87.22 bbl intraday ahead of settlement at $86.59 bbl, up $1.16. Both contracts pared gains after testing retracement resistance.

NYMEX May RBOB futures were pulled higher by the geopolitical escalation, reversing early losses to trade at a $2.8062 gallon fresh seven-month high on the spot continuous chart. RBOB ended $0.0333 higher at $2.7942 gallon, settling above key trendline resistance for the first session since September.

NYMEX May ULSD futures gained $0.0089 with a $2.7413 gallon settlement.

Brian L. Milne can be reached at brian.milne@dtn.com

Brian Milne