Oct 4 2024: Oil prices remained subdued on Friday but were still on course for solid weekly gains, as investors balanced concerns over a potential escalation of conflict in the Middle East with an otherwise well-supplied global market.
Brent crude futures were flat at $77.55 per barrel by 0646 GMT, while U.S. West Texas Intermediate (WTI) crude hovered at $73.65 per barrel. Both benchmarks were heading for weekly gains of around 8%.
While the Middle East accounts for over a third of global oil supply, analysts believe a direct attack on Iran’s oil facilities by Israel is an unlikely response. “Such a move could alienate Israel’s international allies and may provoke an even stronger retaliation from Iran, which could escalate the conflict further,” they explained.
Earlier concerns over supply disruptions that drove prices higher this week have been tempered by OPEC’s spare production capacity, as well as the fact that global crude flows have not yet been impacted by the Middle East unrest.
On Thursday, Libya’s eastern-based government and the Tripoli-based National Oil Corporation announced the reopening of all oilfields and export terminals following a resolution to a central bank leadership dispute. This development ends a crisis that had significantly reduced Libya’s oil output.
Both Iran and Libya are OPEC members. Iran, under U.S. sanctions, produced about 4 million barrels per day (bpd) in 2023, while Libya produced roughly 1.3 million bpd last year, according to data from the U.S. Energy Information Administration.
This week, bearish bets on oil have eased amid growing concerns over potential supply disruptions in the Middle East, as well as optimism that China’s recent economic stimulus measures could boost demand, according to IG market strategist Yeap Jun Rong. “The question now is whether actual crude supply disruptions will materialize, keeping prices in a holding pattern over the weekend,” Yeap added.
U.S. President Joe Biden said on Thursday that discussions are ongoing regarding potential U.S. support for Israeli strikes on Iran’s oil facilities in retaliation for Tehran’s missile attack on Israel. Meanwhile, Israel has launched new airstrikes on Beirut as part of its ongoing conflict with Hezbollah.
Biden’s remarks contributed to a 5% surge in oil prices on Thursday, as Israel considers its options following Iran’s largest-ever attack earlier this week.
“Supply risks are back on the radar as Middle East tensions escalate, but the overall impact may remain limited,” ANZ analysts noted in a report.