Oil prices climbed on Friday, positioning themselves for a positive weekly close amid ongoing worries about escalating tensions in the Middle East, which have maintained a risk premium in the market.
Traders remained wary of a potential intensification of the conflict that could disrupt supply from the region. Attention was also directed toward U.S. efforts to negotiate a ceasefire, which have thus far yielded limited progress.
Brent crude futures for December delivery rose 0.4 percent to $74.70 per barrel, while West Texas Intermediate futures increased by 0.5 percent to $70.55 per barrel as of 21:04 ET (01:04 GMT).
Weekly gains for oil
Both Brent and West Texas Intermediate futures have seen gains of between 1 percent and 2 percent this week, recovering somewhat from significant losses earlier in October. However, a more substantial recovery in crude prices was hindered by data indicating a larger-than-expected rise in U.S. inventories, suggesting a loosening supply situation in the world’s leading fuel consumer.
Moreover, the strength of the dollar also impacted crude prices, as ongoing concerns regarding a slower pace of interest rate cuts by the Federal Reserve influenced traders’ preference for the greenback.
Oil prices further experienced fluctuations throughout the week, driven by speculation regarding the Middle East conflict. While Israel issued stern warnings against Iran, U.S. officials continued their diplomatic efforts to negotiate a ceasefire, particularly ahead of the 2024 presidential elections, which could reshape U.S. policy in the region.
Focus on Chinese stimulus
Recent weakness in the oil market has largely stemmed from fears of declining demand in top importer China. Although the country has announced various stimulus measures, traders have been disappointed by the lack of specific details regarding their timing and scale, especially concerning fiscal initiatives.
Additionally, the Standing Committee of the National People’s Congress is scheduled to meet in November to deliberate on plans for increased fiscal spending, a meeting that was postponed from its original date in late October.
Thursday’s market movements
On Thursday, oil prices rose by over 1 percent, nearly recovering losses from the previous day as renewed Middle East tensions drew attention ahead of the U.S. elections, despite mixed signals from U.S. fuel inventory reports. Brent crude futures gained 95 cents, or 1.27 percent, reaching $75.91 at 0302 GMT, while West Texas Intermediate crude futures rose by $1, or 1.41 percent, to $71.77, amid ongoing supply concerns related to Middle East tensions.
Throughout the week, oil prices have risen nearly 4 percent, bouncing back from a more than 7 percent drop the previous week, which was driven by fears of demand from China and easing concerns over Middle Eastern supply disruptions. Phillip Nova’s Sachdeva noted that the current volatility, influenced by the impending U.S. election and the Federal Reserve’s policy decisions, is likely to lead to further price fluctuations, even as supply remains robust.
U.S. crude inventory update
Meanwhile, U.S. crude inventories rose by 5.5 million barrels last week, according to the U.S. Energy Information Administration, significantly exceeding analysts’ forecasts of a 270,000-barrel increase, as reported by Reuters.
Market reactions to tensions
On Tuesday, oil prices dipped as U.S. diplomats intensified efforts to establish a ceasefire in the Middle East, while slowing demand growth in China continued to weigh on the market. Brent crude futures for December delivery fell by 19 cents, or 0.3 percent, settling at $74.10 per barrel by 03:50 GMT, while West Texas Intermediate futures for November delivery decreased by 18 cents to $70.43 per barrel on its last trading day. The more actively traded December West Texas Intermediate futures dropped by 14 cents, or 0.2 percent, to $69.90 per barrel.
Despite these dips, both Brent and West Texas Intermediate saw nearly 2 percent increases on Monday, recovering part of the over 7 percent decline from the previous week. The ongoing conflict in the Middle East continues to keep the market alert to possible supply disruptions. As of 5:22 GMT, Brent crude futures had gained 0.53 percent to $73.45 per barrel, while West Texas Intermediate rose by 0.66 percent to $69.68 per barrel, following a significant decline of over 7 percent for Brent and around 8 percent for West Texas Intermediate the prior week—the largest weekly drop since early September.
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