Oil prices saw a 1% rise on Friday, driven by geopolitical tensions in the Middle East, particularly in response to concerns about potential retaliation from Iran following a suspected Israeli warplane attack on Iran’s embassy in Damascus. This increase comes despite a weekly loss, with Brent crude futures settling at $90.45 a barrel and U.S. West Texas Intermediate crude futures at $85.66. Throughout the week, oil prices neared a six-month high, reflecting market apprehension over potential supply disruptions in the region.
The International Energy Agency (IEA) contributed to market uncertainty by lowering its forecast for 2024 world oil demand growth to 1.2 million barrels per day (bpd), while OPEC presented a contrasting estimate, stating that world oil demand will rise by 2.25 million bpd in 2024. This discrepancy has led to divergent market sentiments, with some aligning with OPEC’s forecast and others favoring the IEA’s reduced projection.
Additionally, concerns about U.S. interest rate cuts and inflation have influenced market dynamics. The fear of interest rate hikes dampening economic growth and subsequently reducing oil demand has added to the market’s volatility. Furthermore, the potential impact of supply chain issues, including Iran’s threat to shut the Suez Canal, has contributed to the risk premium associated with oil prices.
Despite these fluctuations, Friday’s gains managed to offset previous session losses, which were influenced by persistent U.S. inflation, impacting expectations for an early interest rate cut. Meanwhile, U.S. energy firms have reduced the number of oil rigs operating for the fourth consecutive week, indicating potential implications for future output.