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16 April 2024

Oil prices rise as Opec eyes special meeting


Oil prices rose sharply on Monday as the Gaza conflict intensified and major crude producer Iran said Opec would hold a special meeting next month.

New York's main contract, light sweet crude for February, shot up $2.47 to close at $48.81 a barrel.

Brent North Sea crude for delivery in February rallied $2.71 to settle at $49.62 a barrel on London's InterContinental Exchange.

Crude futures have been boosted over the past week as the conflict in Gaza stokes tensions in the key oil-producing Middle East.

The Gaza conflict has added to the "geopolitical risk premium embodied in the oil price", said David Moore, an analyst at Commonwealth Bank of Australia.

Mike Fitzpatrick at MF Global said the Gaza conflict was a factor but probably would not sustain a rally in oil prices by itself.

"Certainly any martial action on the land bridge that connects three continents and which sits atop a globally important strategic commodity must be taken into account whenever considering oil prices," he said.

"However, it must be remembered that neither side controls any oil. It is secondary to the fact that oil prices coming into the year's end took on an emotional quality that the trading mechanics allowed to run well past economic valuation."

Elsewhere, Iran's Opec representative Mohammad Ali Khatibi on Monday said that the oil producers' cartel would hold an extraordinary meeting in Kuwait in February.

"The extraordinary meeting of the Organisation of Petroleum Exporting Countries is due to be held next month in Kuwait," Khatibi was quoted as saying by state television.

"The exact date has not been fixed yet and no invitation has been sent to the members either," he added in a statement posted online.

Opec, whose 12 members together produce about 40 per cent of world oil, last month agreed to cut output by 2.2 million barrels per day in a bid to shore up crude prices.

World oil prices fell by about 54 per cent in 2008 as a sharp global economic slowdown weighed on energy demand in the second half of the year.

However, in the first half, crude futures rocketed to record highs of above $147 a barrel in July on fears of supply disruptions.

Towards the end of 2008, prices slumped to just above $33 – the lowest in four and a half years.

Crude oil had begun 2008 by vaulting above $100 for the first time as traders worried about violence in oil exporter Nigeria and supply problems in the key US energy market.

Continued geopolitical tensions then saw oil rocket above $120, $130 and $140 on their way to setting all-time highs.