This past Friday saw oil prices dropping. However, both benchmarks posted a weekly gain on elevating concerns with the Middle East supply of oil from the political tensions between the U.S. and Iran.
One of Iran’s elite deputies of Revolutionary Guards mentioned that Iran could easily hit American warships in the Gulf. This threat was only one of the most recent between Tehran and Washington. For now, Iran’s head diplomat tried to make counter U.S. sanctions to attempt to salvage a nuclear deal already denounced by the U.S. President.
Iranian sanctions from the U.S. already cut the crude exports of OPEC members further back in May. These cuts added to supply curbs implemented through a pact led by OPEC to stop output for the first half of the year.
Crude futures with West Texas Intermediate settled 11 cents less at $62.76 a barrel. WTI then posted a weekly gain of 1.8%; this is the first rise in the last month.
Crude futures with Brent fell 41 cents to $72.21 per barrel. However, it increased by 2.3% for the week, the first gain in three weeks.
Tensions in the Middle East Could Cause Oil Prices to Rise Despite How it Seems Now
President of Ritterbusch and Associates, Jim Ritterbusch, says that even though we might see the oil market both domestically and abroad as balanced, it still seems it can evolve developments in the Persian Gulf. It’s because of the smaller military events that the geopolitical risk premium is increasing.
Friday saw the foreign ministry in Iran reject accusations from Saudi Arabia. They claimed Tehran ordered an attack on Saudi’s oil installations that are claimed by Yemen’s Iran-aligned Houthi militia.
It’s likely Iran’s elite Revolutionary Guards facilitated attacks last Sunday on four tankers according to a Norwegian insurers’ report. The tankers included two Arabian ships off Fujairah in the United Arab Emirates.
A Saudi military coalition in Yemen carried out several air strikes on Thursday at the Houthi-held capital Sanaa.
The leader of trading and market strategy at SPI Asset Management, Stephen Innes, told Reuters that since tensions are so high from the U.S. deploying a large military force, a simple tactical error or mistake from Iran could ignite conflict in the Middle East once more.
U.S. officials say the president told his top advisers he doesn’t wish to involve the U.S. in war with Iran.
Other Countries are not Far off in becoming Involved in Tensions
Besides the dip in Iranian exports, shipments from Russia were disrupted. The North Sea, location of the crude underpinning Brent futures, is also in tight supply thanks to outages and oilfield maintenance.
A meeting with OPEC-led ministerial committee this weekend in Saudi Arabia should assess the commitment of member states to their deal in reducing oil productions. They could make recommendations on whether or not to extend or adjust the pact.
The mounting tensions in the Middle East loom over any bearish developments for oil this past week. The events include a record-high production level and the unexpected increase in U.S. crude inventories.
Even so, domestic energy firms reduced the number of oil rigs operating this week for the second week now. The rig count is at its lowest since March of 2018 since some drillers cut their spending.
Oil prices are also facing pressure by fears of global economic growth amid the standoff in trade talks.
The media in China took a hardline approach to the dispute between them and the U.S. They said the trade war would only strengthen China, never bring the nation to its knees.