Oil rose around 1% on Friday, but was set for a small weekly loss, as geopolitical tensions in the Middle East outweighed a bearish world oil demand growth forecast from the International Energy Agency (IEA) and reduced expectations for the US interest rate cuts this year.
Brent crude futures were up $1.02, or 1.1%, at $90.76 a barrel by 1540 GMT, while US West Texas Intermediate crude futures rose $1.16, or 1.4%, to $86.18.
For the week, Brent was set to fall around 0.4%, while WTI was on track to close 0.8% lower this week.
Concern that Iran, the third-largest OPEC producer, might retaliate for an Israeli warplane attack on Iran’s embassy in Damascus on Monday has pushed oil prices to near a six-month high this week.
“The market’s main focus is on whether Iran will retaliate against Israel,” said Andrew Lipow, president of Lipow Oil Associates. The fear of supply disruption associated with the geopolitical events in the Middle East supported prices, he added.
The US expects an attack by Iran against Israel but one that would not be big enough to draw Washington into war, according to a US official. Iranian sources said that Tehran has signaled a response aimed at avoiding major escalation.
Supply chain issues continue to carry the biggest risk premium as Iran maintains its threat to shut the Suez Canal, said Tim Snyder, economist at Matador Economics.
Prices had briefly pared gains after the International Energy Agency cut its forecast for 2024 world oil demand growth to 1.2 million barrels per day (bpd), although OPEC’s view on Thursday that growth would be 1 million bpd higher than that lent support.
“For now the market is mostly in the OPEC 2.2 million bpd demand growth camp as opposed to the IEA’s reduced 1.2 million bpd forecast,” said Saxo Bank’s Ole Hansen.
Friday’s gains also erased the losses from the previous session, which was dominated by stubborn US inflation that dampened hopes for an interest rate cut as early as June.
Published in The Express Tribune, April 13th, 2024.
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