The price of crude oil fell on Friday but is still on track for a second week in a row of gains, as geopolitical tensions and supply disruptions in US boosted sentiment.
After a surge of more than 3% Thursday, oil prices dropped as traders booked profits.
The oil prices were under pressure this week because of the swollen US inventories and the easing of concerns about Israel’s reaction to Iran’s attacks.
Prices recovered quickly as Hurricane Milton, which hit the US, shut down several refineries and affected supply.
Christopher Lewis, an author for Fxempire, said in a recent report:
Crude Oil Market rose a bit in the early hours of Thursday, as we continue to experience a small recovery. This makes sense, because there is a hurricane brewing in the Gulf of Mexico, which will affect production.
This week, oil prices have risen by over 1%
Brent crude and West Texas Intermediate crude oil have both risen by more than 1% this week.
The gains this week are a bit muted in comparison to the week before, when prices surged by 8% following Iran’s attack against Israel.
Analysts believe, however, that the price drop earlier in this week may have been a little overdone.
Lewis said:
It was also oversold, as we suddenly saw a 4% decline earlier in the week. At this point, I believe that short-term price drops will continue to be purchased.
Brent crude surpassed $80 a barrel this week, as reports suggested that Israel considered attacking Iran’s petroleum facilities. The fervour died down when US President Joe Biden asked Israel not to target oil facilities in Iran.
Hurricane Milton could dampen fuel consumption in the US
Hurricane Milton, which is a Category 5 storm, struck Florida on Wednesday. It left a path of destruction in its wake.
Due to the hurricane, several oil refineries were closed and the fuel stations in the area ran out as demand for fuel soared. There are also no oil refineries located in Florida.
Oil facilities in the Gulf of Mexico will likely remain inactive for the next few weeks, pushing up crude oil stocks in the US.
Reuters reported that Hiroyuki Kikukawa is the president of NS Trading – a division of Nissan Securities.
Geopolitical tensions persist
Prices are likely to stay volatile as oil markets assess Israel’s response to the attack by Iran last week.
Yoav Galant, Israeli Minister of Defence, has stated that any response to Iran will be “lethal and precise”
Iran supports several proxy groups that fight Israel. These include Hezbollah and Hamas, both in Lebanon, as well as the Houthi rebels of Yemen.
According to the Lebanon’s Health Ministry, Israel carried out attacks in central Beirut on Thursday. The strikes killed 22 people and injured 117 more, according to the ministry.
In the short-term, the risk premium on crude oil prices will likely remain unchanged as the market attempts to gauge the true impact of Hurricane Milton while waiting for Israel to respond.
Brent crude is down 1.2% to $78.45 a barrel at the time this article was written, and WTI is down 1.1% to $75 a barrel.
This post Oil Prices Dip but Still on Track for Weekly Gains Despite Supply Disruptions may be updated as new information unfolds
