Oil prices spike as G7 enforces Russian export price caps, Israel-Hamas war continues

Ines Ferré

Ines Ferré· Senior Business Reporter Fri, October 13, 2023, 2:18 PM EDT In this article: 

Oil prices jumped more than 5% during Friday’s session amid the Israeli-Hamas war and a clampdown by the US on Russian crude export price caps.

On Friday afternoon, West Texas Intermediate (CL=F) and Brent International (BZ=F) settled at $87.69 and $90.89 per barrel, respectively.

The spike comes as Israel launches counterattacks against Hamas and warns residents of northern Gaza to evacuate their homes. The Oct. 7 surprise attack on Israel by the Palestinian Islamist group Hamas has sparked worries of the conflict broadening to other participants, including Iran.

“The oil market may be anticipating that the United States will more strictly enforce sanctions on both Russia and Iran and that will lead to a reduction of oil supplies,” Andy Lipow, president of Lipow Oil Associates, told Yahoo Finance on Friday.

Oil is also reacting to enforcements on Russian oil exports price caps imposed by the G7 last year, aimed at limiting funds to Russia for its war against Ukraine.

On Thursday the coalition said it identified the owners of vessels carrying Russian oil priced above the $60 price cap.

“As a Coalition, we reiterate our strong commitment to imposing sanctions and other economic measures against Russia in response to its illegal, unjustifiable and unprovoked war,” read the statement by the G7, which includes Canada, France, Germany, Italy, Japan, the UK, and the US.Crude Oil Nov 23 (CL=F)View quote detailsNY Mercantile – Delayed Quote (USD)88.09+1.43(+1.6501%)As of 9:56AM EDT.Market open.Add to watchlist

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Oil has been volatile this week amid worries of a broader conflict breaking out in the Middle East following the worst assault on Israel in decades. Prices rose early in the week but fell on Wednesday amid speculation that Iran, a longtime ally of Hamas, may not have been involved in a surprise attack on Oct. 7.

Targets against Iran’s oil fields or a disruption of the nearby Strait of Hormuz, a major passageway for crude, would likely send crude prices higher.

“I think that if evidence is found that directly connects Iran to the massacre perpetrated by Hamas, it is much more likely that Iranian military targets are struck,” said Lipow.

The analyst points out Iran increased its oil production to over 3.2 million barrels per day from 2 million in 2020 and has raised exports to China.

“The [US] administration has turned a blind eye to these increases as they are focused on reining in gasoline prices,” said Lipow. “This has put the administration in a difficult position as taking oil supplies off the market will result in higher gasoline prices, which is politically unpalatable.”

Gas prices are seen at a Mobil gas station in Los Angeles on September 28, 2023. California gas prices are nearing USD $7 per gallon in some locations as oil prices surge toward $100 a barrel. (Photo by Robyn Beck / AFP) (Photo by ROBYN BECK/AFP via Getty Images)
Gas prices are seen at a Mobil gas station in Los Angeles on Sept. 28, 2023. (ROBYN BECK/AFP via Getty Images)

The Israel-Hamas conflict and US enforcements on Russian crude exports price caps come at a time when gasoline prices in the US have been declining in recent weeks.

On Friday, the national average for gas in the US was at $3.62 per gallon versus $3.91 a year ago. Gasoline reached a 2023 high of $3.88 per gallon on Sept. 18 as oil was continuing to rise in price.

Crude rallied an average of 28% last quarter, jumping to a yearly high on Sept. 27 as OPEC+ output cuts and further supply restraints from Saudi Arabia and Russia created a deficit in the market.

Ines Ferre is a senior business reporter for Yahoo Finance. Follow her on Twitter at @ines_ferre.

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