Oil prices rose nearly 6% on Friday on the possibility that conflicts in the Middle East could escalate further as Israel launches ground attacks on the Gaza Strip.
Brent futures rose $4.89, or 5.7%, to $90.89 a barrel. West Texas Intermediate (WTI) crude oil rose $4.78, or 5.8%, to $87.69 a barrel.
Both indicators posted their highest daily percentage gains since April.
Brent also posted its biggest weekly gain since February, with a weekly gain of 7.5%. WTI rose 5.9% for the week.
Israel is not a major producer, and the conflict in the Middle East has had little impact on global oil and gas supplies. But investors and market watchers need to consider how this situation could escalate and what it might mean for supplies from nearby countries in the world’s largest oil-producing region.
There are those who expect oil prices to reach $100 per barrel due to the current situation in the Middle East.
If the United States tightens sanctions on Iran’s oil exports because of any role it may have in the conflict, Iran’s oil supplies could decline.
Saudi Arabia has shelved US-backed plans to normalize relations with Israel, some sources familiar with Riyadh’s thinking said, signaling that foreign policy priorities must be quickly rethought as the conflict escalates.
This could have implications for supply, as Saudi Arabia has told the White House it is willing to increase oil production early next year to help secure the deal.
The oil market predicts that the US will impose stricter sanctions on both Russia and Iran, which will lead to a decrease in supply.
The US move on Thursday to impose the first sanctions on tanker owners carrying Russian oil above Group of Seven’s $60 per barrel ceiling price also boosted prices.
Russia is the world’s second-largest oil producer and a major exporter, and tighter U.S. scrutiny of its shipments could restrict supply.
The Organization of the Petroleum Exporting Countries (OPEC) this week maintained its forecast for growth in global oil demand, citing signs that the world economy has been resilient so far this year and expecting demand to rise further in China, the world’s largest oil importer.
On the U.S. supply front, drillers added four oil rigs this week, the biggest weekly gain since March, Baker Hughes said.
The U.S. Commodity Futures Trading Commission (CFTC) said money managers reduced their net long U.S. crude futures and options positions to 240,204 by 39,556 contracts in the week to Oct. 10.
