Oil prices climbed about 3% to a one-week high on Friday on worries that tensions in Israel and Gaza could spread into a wider conflict that could disrupt global crude supplies.
Brent futures rose $2.25, or 2.6%, to $90.18 a barrel by 1:40 p.m. EDT (1740 GMT). U.S. West Texas Intermediate (WTI) crude rose $2.14, or 2.6%, to $85.35.
Brent’s premium over WTI was on track for its highest since July, making it more attractive for energy firms to send ships to the U.S. to pick up crude for export.
For the week, Brent remained down about 2% and WTI down about 3%.
Trading was choppy. Early in the session, oil prices soared by more than $2 a barrel after the U.S military struck Iranian targets in Syria. Prices briefly turned negative as markets digested various reports on mediation talks with the militant Hamas group and Israel led by Qatar in coordination with the U.S.
“We are at the mercy of the next headline … and I think that’s kind of what we’ve been seeing today with the price swings,” said Phil Flynn, an analyst at Price Futures Group.
“You’d like to be trading the fundamentals, but you really can’t because you’ve got to be more worried about … what’s going to happen in the Middle East,” Flynn said. “No one wants to be short over the weekend.”
A Hamas official conditioned the release of hostages in Gaza on a ceasefire in Israel’s bombardment of the Palestinian enclave, launched after a deadly Hamas rampage into southern Israel nearly three weeks ago.
The U.S. and Arab countries have urged Israel to delay a planned ground invasion that would multiply civilian casualties and might ignite a wider conflict.
RED LINES
Middle East developments have so far not directly impacted oil supplies, but many fear disruptions of exports from major crude producer and Hamas-backer Iran and others.
“(It) remains incredibly difficult even for the most knowledgeable regional watchers to make high conviction calls about the trajectory of the current crisis, as the red lines that could bring more players onto the battlefield remain largely indiscernible,” RBC Capital analyst Helima Croft said.
Goldman Sachs analysts retained their first-quarter 2024 Brent crude price forecast at $95 a barrel but added that lower Iranian exports could cause baseline prices to rise by 5%.
Prospects for oil demand were uncertain.
U.S. consumer spending surged in September but was seen cooling off in early 2024. Economists believe the U.S. Federal Reserve is done raising interest rates to fight inflation, which can slow economic growth and reduce oil demand.
Economists told Reuters they expect high inflation will continue to dog the world economy next year.
