Oil headed for a modest weekly gain as fears the Israel-Hamas war could destabilize the Middle East and crimp global supply were offset by signs of flagging demand.
(Bloomberg) — Oil headed for a modest weekly gain as fears the Israel-Hamas war could destabilize the Middle East and crimp global supply were offset by signs of flagging demand.
West Texas Intermediate rose toward $84 a barrel on Friday and is up around 1% this week. Most of the surge on Monday following the Hamas attack on Israel has been unwound on expectations the conflict will be contained, with OPEC linchpin Saudi Arabia urging peace in a rare high-level diplomatic call with Iran. Still, an Israeli ground invasion of Gaza could lead to more volatility.
The biggest increase in US crude stockpiles since February helped push prices down on Thursday, though that was tempered by another drop in supply at the storage hub in Cushing, Oklahoma — the delivery point for WTI. The International Energy Agency said that oil’s recent retreat from near $100 a barrel showed prices had climbed high enough to start eroding demand, although it still sees record world consumption this year.
Crude has had a volatile week. Traders are trying to price in the potential for the war to draw in Iran, a supplier of arms and money to Hamas. The Biden administration is probing Tehran’s potential involvement in the attack and has reached an informal understanding with Qatar to hold off distributing $6 billion in oil revenue that Iran was allowed to access. The Islamic Republic has repeatedly denied any involvement in the assault.
“The key threat to oil will only come if Iran’s involvement is proven,” said Charu Chanana, market strategist for Saxo Capital Markets Pte in Singapore. “The oil demand outlook also remains muddled.”
The Organization of Petroleum Exporting Countries on Thursday continued to flag a record oil supply deficit this quarter, saying global inventories will decline by 3 million barrels a day this quarter. Output curbs by the producer group and its allies, including voluntary cuts by Saudi Arabia and Russia, have crimped supply.
Meanwhile, the US also imposed the first sanctions for violations of the price cap on Russian oil, on mounting evidence the restriction is failing to cut Kremlin revenue as hoped.
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