Oil prices climb as Middle East conflict counters ample supply outlook

4:46 am Friday, October 04th, 2024

By Ahmad Ghaddar

LONDON (Reuters) -Oil prices rose further on Friday and were on track for strong weekly gains as investors weighed the prospect of a wider Middle East conflict disrupting crude flows against a well-supplied global market.

Brent crude futures were up 55 cents, or 0.7%, at $78.17 a barrel, as of 0831 GMT. U.S. West Texas Intermediate crude futures were up 50 cents, also 0.7%, at $74.21 a barrel.

Both benchmarks were headed for weekly gains of about 9%.

“While Iran has ‘saved face’ by its rocket attack on Israel on Tuesday, fears are growing that Israel might target Iranian oil infrastructure under its response, which could provoke further retaliation dragging neighbouring states into the conflict,” Panmure Gordon analyst Ashley Kelty said.

The U.S. is discussing whether it would support Israeli strikes on Iran’s oil facilities as retaliation for Tehran’s missile attack on Israel, President Joe Biden said on Thursday, while Israel’s military hit Beirut with new airstrikes in its battle against Lebanese armed group Hezbollah.

Biden’s comments contributed to a 5% rally in oil prices on Thursday, as Israel weighs its options after arch-foe Iran launched its largest-ever assault on Tuesday.

“The market had already had a substantial amount of short positioning and low amounts of net length in the market – leaving the market prone to price spikes higher,” StoneX analyst Alex Hodes said.

Concerns over oil supply that drove up prices earlier in the week have also been tempered by OPEC’s spare production capacity and the fact that global crude supplies have yet to be disrupted by the Middle East unrest.

Meanwhile, Libya’s eastern-based government and Tripoli-based National Oil Corp announced on Thursday the reopening of all oilfields and export terminals after a dispute over leadership of the central bank was resolved, ending a crisis that had heavily reduced oil production.

This would allow the country to more than double its production levels, restoring them to about 1.2 million bpd.

(Additional reporting by Gabrielle Ng in Singapore; Editing by Hugh Lawson)