President Joe Biden on Thursday declined to rule out the possibility of Israel targeting Iran's oil facilities as tensions in the Middle East continue to increase. U.S. oil prices jumped on Biden's comments.
The U.S. president told members of the press at the White House Thursday that he was "discussing" the potential for Israeli strikes on Iran's oil infrastructure and whether he will support such an action.
"First of all, we don't 'allow' Israel, we advise Israel. And there is nothing going to happen today," Biden told reporters Thursday.
Israel is considering its response to what the Wall Street Journal called "one of the biggest ballistic-missile barrages in the history of warfare," launched by Iran on Tuesday against Israel.
U.S. oil prices spiked 4% to $73 per barrel following Biden's comments on Thursday, extending the week's surge to a one-month high. Brent futures, the international benchmark, jumped 4.3% to more than $77 per barrel. U.S. oil prices and Brent prices remain down 11.5% and 8.8%, respectively, on the year.
Joe Biden: Oil Stocks Take Off
Meanwhile, oil stocks tracked toward their strongest week since October 2022 as the conflict between Iran and Israel raised oil supply concerns.
Oil-specific names trading high on the S&P 500 included Valero Energy, Diamondback Energy, Marathon Petroleum and APA. The stocks showed gains ranging from 3% to 5%.
Among the industry's largest names, Chevron advanced 0.6% to 151.88 on Thursday while Exxon Mobil gained 0.8% to 122.50.
ConocoPhillips and Occidental Petroleum edged up less than 2% apiece.
In oilfield services, industry leaders SLB and Halliburton gained 1.5% and 2.3%, respectively, on Thursday.
War Widens In The Middle East
Iran fired more than 200 missiles toward Israel late Tuesday, a response to Israel's killing last week of Hezbollah leader Hasan Nasrallah, a key Tehran ally. The U.S., Britain and French militaries all reportedly took part in defending against the attack, with only a few missiles reaching their targets. Several persons were reported injured.
The U.S. and Israel vowed that Iran would face consequences for the attack.
Israeli ground forces on Wednesday engaged with Hezbollah militants within Lebanon in what was apparently the first direct conflict between the two militaries. On Thursday, the Israeli Defense Forces reported 130 missiles fired from Lebanon into Israel. The IDF signaled the conflict could be set to expand, informing residents in 20 different towns to evacuate.
The week's event broadened the conflict that began with a surprise attack by Hamas on Oct. 7, 2023 on Israeli citizens. The attack by the Palestinian terrorist organization reportedly killed 1,139 persons, most were nonmilitary Israelis. Approximately 250 persons, Israelis and foreign nationals, were taken hostage by the Hamas attackers. As of Sept. 1, 101 hostages were thought to remain alive in Gaza.
Israel's response to the attack has thus far led to the deaths in Gaza of more than 41,000 Palestinians and about 2,000 others. As many as 134 journalists and 224 humanitarian aid workers have also been killed.
The Oil Price Link
Oil prices have climbed as Iran and Israel have more clearly crossed the line into direct engagement. Oil markets worry that Israel could choose to damage Iran's oil production, transport or export facilities, aiming to sever the country's most critical source of revenue.
Another fear is that the U.S. will sanction Iran and limit or reduce or end completely its oil exports.
Hiring Picks Up, Dimming Odds Of Big Fed Rate Cut
Iran's oil production has doubled over the past five years, from around 2 million barrels per day in 2019 to around 4 million bpd currently. Exports were near zero in 2019. Under relaxed Biden Administration rulers, exports have increased to around 2 million bpd.
China is reportedly the only major buyer of Iranian oil, which is generally heavy crude, well-suited to producing diesel fuel. Consequently, loss of Iranian exports would send China out to bid against other buyers for other courses of oil, pressuring prices higher.
The Biden administration's quandary is that sanctioning Iran oil exports would mean driving oil prices higher just ahead of the November presidential election. However, there is a strong possibility that Biden's comments on Thursday were meant to act as a deterrent to Iran leadership, signaling the government not to intercede as Israel dismantles Iran's proxy group Hezbollah in Lebanon.
An IDF official on Thursday afternoon told Tel Aviv-based newspaper Haaretz that Israel's military would not allow Hezbollah "to return near the border."
A Few Oil Stocks Worth Noting
West Texas Intermediate, the benchmark U.S. oil blend, hits its high for this year just below $87 per barrel in April. An early summer rally sent it briefly to a high near $84. WTI has since lagged, dropping below $66 in early September.
As a result, oil stocks have also lagged.
Several have managed to put together actionable chart patterns. Exxon Mobil, the most obvious, trades above a 120.50 buy point in a six-week base pattern. Chevron severed a downtrend as it jumped back above its 10-week line.
SLB, formerly, Schlumberger, is climbing past resistance at its 10-week line. Halliburton's chart is similar, but just testing resistance at its 10-week moving average.
Buying into those trend line breaks means having buying into the idea that oil prices may either hold steady or continue higher. There are various scenarios under which that is not likely.
One of the biggest moves among oil stocks has come from LandBridge. The June IPO is up 135% from its launch and showing steadfast support at its 21-day exponential moving average. The outfit is essentially a landlord of production acreage, not an oil producer.
Please follow Kit Norton on X @KitNorton for more coverage.
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