Oil Prices Up As Iran Tests Ballistic Missiles, OPEC Raises Economic Forecasts

Oil prices rose on Tuesday pushing up average gasoline prices at the pump on concerns supply could be disrupted as Iran tested a ballistic missile in the Gulf of Oman, while demand hopes were led by OPEC raising its economic forecasts.

Nymex WTI, the U.S. benchmark crude oil futures contract, was up 1.8% in afternoon trading at $78.27 a barrel — its seventh-consecutive daily gain. Closing in on the $80-a-barrel mark would take it to its highest level since November.

Brent crude, the European benchmark, was up 1.2% at $82.97 a barrel, while the United States Oil Fund USO an exchange-traded fund (ETF) that tracks the price of light-sweet crude, climbed 1% to $72.80.

Iran Launches Missiles

Iran said on Tuesday that it had launched long-range ballistic missiles from one of its warships in the Gulf of Oman for the first time, firing two projectiles capable of striking targets within a range of 1,700 kilometers, or 1,050 miles.

The missile, according to the Iranian Islamic Revolutionary Guard Corps. (IRGC), traveled 750km, before hitting a target in the Iranian desert.

The IRGC said in a statement: “Through this new achievement, our range of influence and naval power have increased to any point required.”

The missile test raised concerns that Iran could, if drawn into a wider Middle East conflict, begin targeting shipping in the Gulf of Oman as it exits the oil producing areas in the Persian Gulf. Or, if it targets Israel, the escalation could impact oil production in the region.

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Rising Gas Prices

Paris-based International Energy Agency said on Tuesday, however, that downward pressure on prices would resume this year in the absence of major geopolitical escalation.

IEA executive director Fatih Birol said: “Oil supply increases from the Americas will be more than enough to meet demand growth this year, putting downward pressure on oil prices this year.”

Meanwhile, the price of gasoline at U.S. pumps is up slightly due to high demand and tighter supply. Patrick De Haan at Gas Buddy said on Tuesday that the national average price per gallon was up to $3.23, the highest it’s been since early December.

Prices of wholesale gasoline have continued to rise over the past couple of weeks, with RBOB futures now up to $2.4045 a gallon — its highest level since late September.

And the United States Gasoline Fund UGA, which tracks the price of RBOB wholesale gasoline, 1.6% at $68.71 — also a high since September.

Warren Patterson, commodities strategist at ING said prices “were likely to remain supported in the short term as refineries go into maintenance season.”

OPEC Raises Economic Forecast

OPEC, the oil cartel, released its latest monthly oil report on Tuesday, and while it didn’t change its demand forecasts, it raised its economic forecast amid easing inflation and expected cuts in interest rates.

Its outlook, on the whole, was balanced: “Robust economic activity in China, global air travel recovery and expected healthy petrochemical feedstock requirements will be key for oil demand growth in 2024."

It added, however: “Inflation levels, monetary tightening measures and sovereign debt levels could weigh on global oil demand prospects in the current year.”

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