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Oil prices were relatively unchanged on Friday but remained on track for significant weekly gains as investors balanced the risks of potential supply disruptions due to escalating tensions in the Middle East against a well-supplied global oil market.
As of 04:15 GMT, Brent crude futures slipped by 8 cents to $77.54 per barrel, while U.S. West Texas Intermediate (WTI) crude futures edged down by 6 cents to $73.65 per barrel. Despite these marginal declines, both benchmarks are set to post weekly gains of approximately 8%.
The potential for further conflict in the oil-rich Middle East has raised concerns about supply interruptions. Investors, however, are also factoring in global supply levels, which remain robust for now. According to Yeap Jun Rong, market strategist at IG, bearish positions on oil have been unwinding this week due to mounting fears over supply disruptions, as well as optimism surrounding China’s recent economic stimulus measures, which could bolster demand.
The geopolitical tension in the Middle East has significantly influenced market sentiment. On Thursday, President Joe Biden acknowledged that the U.S. was considering supporting Israeli strikes on Iran’s oil facilities in retaliation for Tehran’s missile attack on Israel. Meanwhile, Israel has escalated its military operations, striking targets in Beirut as part of its ongoing conflict with Hezbollah, a Lebanon-based militant group backed by Iran. These developments contributed to a 5% surge in oil prices on Thursday.
Although the region produces over a third of the world’s oil supply, analysts believe that a direct attack on Iran’s oil facilities is the least likely course of action for Israel, despite the current tensions.
Concerns about potential supply shortages have been mitigated by ample OPEC spare production capacity. Additionally, despite the Middle East unrest, global oil flows have not yet been directly affected. In a positive development for global supplies, Libya’s National Oil Corporation and the eastern-based government resolved a leadership dispute over the country’s central bank, allowing for the reopening of oil fields and export terminals. This decision ends a crisis that had significantly reduced Libya’s oil production.
Both Iran and Libya are members of OPEC. Iran, under U.S. sanctions, produced approximately 4 million barrels per day of crude oil in 2023, while Libya’s production stood at 1.3 million barrels per day last year, according to data from the U.S. Energy Information Administration.
