OIL FUTURES: Crude rises on Middle East tensions, expected OPEC+ meeting decision

Crude oil futures rose in midmorning trading in Asia on Aug. 2, as escalating Middle East tensions overshadowed the unsurprising OPEC+ decision to restore production levels starting October.

At 11:36 Singapore time (0336 GMT), the ICE October Brent crude oil futures contract rose 62 cents/b (0.78%) to $80.14/b, while the NYMEX September light sweet crude contract increased 62 cents/b (or 0.81%) to $76.93/b.

Iran has ordered a direct strike on Israel, the New York Times reported, following its accusation that Israel killed a Hamas political leader in Tehran, who was an official guest at Iran's new president's inauguration ceremony.

"Oil prices have been lifted sharply by escalating tensions in the Middle East between Iran and Israel," analysts at IG said.

OPEC and its allies announced they will proceed with their plan to unwind some voluntary crude production cuts from October, as expected by traders. This decision comes despite recent declines in crude prices, which had fueled speculation that the group might alter its course and keep some of these barrels off the market.

OPEC+ is currently cutting output by a total of 5.86 million b/d, which accounts for about 5.7% of global demand, as part of reductions agreed since 2022 to address oversupply and support higher oil prices.

In a statement following the Aug. 1 meeting, OPEC+ said that members will phase out the most recent 2.2 million b/d voluntary cut starting October, although the restoration of production "could be paused or reversed, depending on market conditions."

Traders were now awaiting the next OPEC+ Joint Ministerial Monitoring Committee meeting Oct. 2, as no definitive conclusion was reached.

Elsewhere, the Bank of England cut interest rates for the first time since the pandemic, lowering rates to 5.0% from 5.25%.

Dubai swaps

Dubai crude swaps intermonth spreads narrowed in midmorning trading in Asia on Aug. 2 from the previous close.

The October Dubai swap was pegged at $78.27/b at 10 am Singapore time (0200 GMT), down $1.23/b (1.55%) from the Aug. 1 Asian market close.

The September/October Dubai swap intermonth spread was pegged at 60 cents/b at 10 am Singapore time, down 4 cents/b from 64 cents/b at the Aug. 1 Asian close, and the October/November intermonth spread was pegged at 45 cents/b, down 6 cents/b over the same period.

The October Brent-Dubai exchange of futures for swaps was pegged at $1.73/b, narrowing 12 cents/b on the day.