Oil prices rose nearly 3% on Friday to a one-week high on concerns that tensions in Israel and Gaza could escalate into a broader conflict that could disrupt global crude oil supplies.
Brent futures rose $2.55, or 2.9%, to settle at $90.48 a barrel, while U.S. West Texas Intermediate (WTI) crude rose $2.33, or 2.8%, to settle at $85.54.
Brent’s premium over WTI rose to its highest level since March, making it more attractive for energy firms to send ships to the United States to pick up crude for export.
On a weekly basis, Brent lost approximately 2% and WTI lost approximately 4%.
Trade was volatile. Earlier in the session, oil prices rose more than $2 per barrel after the US military struck Iranian targets in Syria. Later, the markets turned negative for a short time with mediation talks between the Hamas group and Israel, led by Qatar, in coordination with the United States.
It has become difficult to trade on fundamentals and one has to worry more about what will happen in the Middle East.
Israeli air and ground forces have stepped up their operations in the Gaza Strip while keeping the besieged area under heavy bombardment.
Meanwhile, a Hamas official made the release of hostages in Gaza conditional on a ceasefire in Israel’s bombing of the Palestinian area.
Many countries, including many Arab nations, have called on Israel to delay a planned ground offensive that could increase civilian casualties and spark a wider conflict.
Developments in the Middle East have not directly affected oil supplies so far, but many fear disruptions to exports from major crude producers and Hamas supporters in Iran and others.
It remains incredibly difficult for even the most knowledgeable regional observers to comment on the course of the current crisis, as the red lines that could bring more players onto the battlefield remain largely unnoticeable.
Some analysts kept their Brent crude oil price forecast for the first quarter of 2024 at $95 per barrel but added that a decrease in Iranian exports could cause base prices to increase by 5%.
Prospects for oil demand are uncertain.
U.S. consumer spending rose in September but is projected to calm down in early 2024. Some economists believe the Federal Reserve has stopped raising interest rates to fight inflation, which could slow economic growth and reduce demand for oil.
However, economists said they expect high inflation to continue affecting the world economy next year.
