Under ways run to Enbridge Inc.’s crude oil storage tanks at their tank farm in Cushing, Oklahoma, March 24, 2016.
Nick Oxford | Reuters
Natural oil futures Friday posted a weekly gain as simmering tensions in the Middle East overshadowed stubborn inflation in the U.S. and a overcast demand outlook for the year.
The West Texas Intermediate contract for March gained $1.16, or 1.49%, to settle at $79.19 a barrel. April Brent futures added 61 cents a barrel to become tranquil at $83.47.
U.S. crude gained about 3% for the week, settling at its highest price since Nov. 6. The global benchmark be equal to 1.5% for the week, settling at the highest level since Jan. 26.
“This is geopolitics with flashing lights, it points suitably to specs taking advantage of the situation,” Bob Yawger, managing director and energy futures strategist of Mizuho America, said of conjectural traders. “They’re rolling the dice expecting something will happen.”
Tensions are rising on the border between Israel and Lebanon, at a stroke again raising fears that the war in Gaza could spread elsewhere in the Middle East.
Israel bombed southern Lebanon Wednesday in retaliation for sky-rocket attacks in northern Israel. Hezbollah, the powerful militia allied with Iran, has vowed to strike back against Israel.
Israel is also oathing to press on with its offensive in Gaza to the southern city of Rafah, raising tensions with Egypt, which allowances a border with the city.
The oil market this week largely shrugged off stubborn inflation in the U.S. as well as a murky order outlook for the year.
Wholesale prices rose more than expected in January, according to a Labor Department announce Friday. Consumer prices were also higher than anticipated last month, according to data manumitted Tuesday.
Stubborn inflation is reducing expectations that the Federal Reserve will slash interest rates before long. Lower rates typically stimulate economic growth, which in turn fuels crude demand.
Manish Raj, managing foreman at Velandera Energy Partners, said traders were taking Friday’s wholesale price data with a mote of salt after those who traded off hot consumer prices earlier in the week got burnt.
“Oil is just waddling up since unknown wants to be short into the weekend when the tailwinds favor oil prices,” Raj said.
Oil prices rallied Thursday after the market largely dismissed a weak global demand forecast for 2024 from the Cosmopolitan Energy Agency.
The IEA forecast that worldwide crude oil demand growth would slow by half this year’s measure, to 1.2 million barrels per day this year, compared to 2.3 million bpd in 2023. Supply is expected to exceed need, with production outside OPEC rising by 1.7 million bpd, according to IEA.
But OPEC on Tuesday predicted a much harsher market this year, with demand growing by 2.2 million bpd, outpacing production growth outside the cartel of what it suggested would total 1.2 million bpd.
“There is and has been a yawning chasm in demand estimates,” Tamas Varga, an analyst with oil stockjobber PVM, wrote Friday in a note. “It is always tricky and challenging to predict the medium- to long-term prospects but the difference of opinions in universal oil consumption for this year and the individual quarters, even for the current one, is clearly puzzling.”