Oil Prices Stabilize, Poised for Weekly Gains Amidst Rising Demand and Geopolitical Tensions

Crude oil futures held steady on Friday, with Brent crude futures for August settlement experiencing a slight dip and U.S. West Texas Intermediate (WTI) crude futures for August delivery also edging lower. However, both benchmarks were set to achieve a second consecutive week of over 3% gains, reaching their highest levels in over seven weeks.

This positive momentum is attributed to several factors, including a seasonal increase in demand, as evidenced by recent data from the U.S. Energy Information Administration (EIA). The EIA report revealed a significant rise in total product supplied, a proxy for U.S. oil demand, and a drawdown in both crude and gasoline inventories.

Geopolitical tensions also played a role in supporting oil prices. Ukraine’s military reported drone strikes on Russian oil refineries and military installations, while the head of Lebanon’s Hezbollah threatened a full-scale conflict with Israel and even extended the threat to Cyprus. Such escalations raise concerns about potential disruptions to crude oil supply from key producing regions.

However, the upward pressure on prices was partially offset by U.S. economic data showing a decline in new unemployment claims. This could lead the Federal Reserve to maintain its current interest rate policy, which may limit economic growth and subsequently dampen oil demand.

Overall, the oil market remains dynamic, with a complex interplay of factors influencing prices. While improving demand and geopolitical tensions support higher prices, concerns about potential interest rate hikes and their impact on economic growth create a counterbalance. As the market continues to assess these competing forces, it is likely to remain volatile in the near future.