Oil is on track for a weekly increase amid concerns over potential supply disruptions in the Middle East
Oil prices edged lower on Friday, but remained on track for a second consecutive weekly gain as traders balanced the effects of hurricane damage on U.S. demand with the risk of a broader supply disruption if Israel targets Iranian oil facilities.
Brent crude futures had dropped 60 cents, or 0.8%, to $78.80 a barrel, while U.S. West Texas Intermediate (WTI) futures slipped 57 cents, also 0.8%, to $75.28 per barrel. Both benchmarks, however, were still set for weekly gains.
Barclays noted in a client report that the possibility of an Israeli strike on Iranian oil infrastructure presents a significant risk for oil markets. Such an attack could reduce the current spare capacity and create a geopolitical risk premium, contributing to recent market volatility.
Yeap Jun Rong, a strategist at IG, commented that concerns over high crude inventories and the possibility of a more gradual pace of monetary easing by the U.S. Federal Reserve had paused the recent oil price rally.
In the U.S., Hurricane Milton had caused severe damage after hitting Florida, resulting in at least 10 deaths and widespread power outages. This destruction could reduce fuel demand in some areas of the world’s largest oil producer and consumer.
Oil prices spiked earlier this month after Iran fired over 180 missiles at Israel on October 1, raising the likelihood of Israeli retaliation against Iran’s oil facilities. While Israel has not yet responded, the oil market has stabilized somewhat since then.
Israel’s Defense Minister Yoav Gallant warned that any potential strike against Iran would be “lethal, precise, and surprising.”
Gulf states are reportedly urging Washington to dissuade Israel from attacking Iranian oil sites, fearing retaliation from Tehran’s regional allies, such as Hezbollah and the Houthis, if the conflict intensifies, according to three Gulf sources cited by Reuters.
On the supply front, Libya’s National Oil Corporation (NOC) announced Thursday that it had restored production to 1.22 million barrels per day, nearing pre-crisis levels following a disruption linked to the country’s central bank crisis.
