Crude oil prices have begun to decline as the week draws to a close, yet they are poised to achieve another weekly gain, buoyed by ongoing tensions in the Middle East and concerns regarding supply security.
Gulf states are actively engaging with Washington to persuade Israel not to target Iranian oil sites. There are fears that such actions could trigger retaliatory strikes by Iran-affiliated groups on the oil infrastructure of these Gulf nations.
A Saudi analyst close to the ruling family conveyed, “The Iranians have stated: ‘If the Gulf states open up their airspace to Israel, that would be an act of war.'” He emphasized that the Gulf states are unwilling to permit Israel to use their airspace, expressing hope that there would be no attacks on oil facilities.
Furthermore, an unnamed source from the Gulf reiterated that the oil-rich nations had previously declared their neutrality in the ongoing conflict. The potential escalation of hostilities holds significant bullish implications for oil prices, particularly given Israel’s apparent choice to act independently of U.S. consultations on military actions.
In addition to geopolitical tensions, Hurricane Milton contributed to the uptick in oil prices this week after making landfall in Florida. While it was initially projected to cause widespread devastation as a Category 5 hurricane, it lost considerable strength before reaching land.
Hiroyuki Kikukawa, president of NS Trading, noted, “Investors are evaluating how hurricane damage might impact the U.S. economy and fuel demand.” He indicated that oil prices are expected to remain around the current 200-day average levels, with the main concern being whether Israel will retaliate against Iranian oil facilities.
On Thursday, oil benchmarks surged by approximately 3% as the Israeli government convened to deliberate its potential responses to Iran. By early Friday, Brent crude was trading at around $80 per barrel, while West Texas Intermediate was priced above $75.
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