Oil Prices Relatively Unaffected by Middle East Conflict and Ample Supply Outlook, Reports Reuters

By Gabrielle Ng and Nicole Jao

SINGAPORE – Oil prices experienced minor fluctuations on Friday, but they were positioned for strong weekly gains as investors navigated the potential for an expanded conflict in the Middle East to disrupt crude oil supplies against a backdrop of a well-supplied global market.

As of 0415 GMT, Brent crude futures dipped by 8 cents, or 0.1%, settling at $77.54 a barrel, while U.S. West Texas Intermediate crude futures fell by 6 cents, or 0.08%, to $73.65 a barrel. Both benchmarks were on course for approximately 8% weekly increases.

This week has seen a reduction in bearish sentiment surrounding oil, fueled by rising apprehensions about possible supply disruptions in the Middle East, alongside an optimistic outlook regarding China’s recent economic stimulus measures potentially boosting demand, according to market strategist Yeap Jun Rong.

"The key question remains whether any actual disruptions to crude supplies will occur, which is likely to keep prices in a holding pattern over the weekend," Yeap commented.

President Joe Biden noted on Thursday that discussions were underway regarding support for Israeli strikes on Iranian oil facilities in retaliation for a missile attack on Israel orchestrated by Tehran. Concurrently, Israel’s military conducted airstrikes in Beirut as part of its ongoing conflict with the Lebanese group Hezbollah.

Biden’s remarks fueled a 5% spike in oil prices on Thursday, corresponding with Israel weighing its response options following what has been described as Iran’s largest assault to date.

"Supply concerns have resurfaced due to heightened tensions in the Middle East, although we anticipate the impact will be limited," analysts from ANZ stated.

Despite the region supplying more than a third of the world’s oil, the likelihood of a direct strike on Iran’s oil infrastructure appears low, according to the analysts. Such an action could alienate international allies, and a disruption to Iran’s oil revenue might leave Iran with little incentive to restrain its response.

Concerns about oil supply that have elevated prices earlier in the week have been moderated by OPEC’s available production capacity and the absence of any significant disruptions in global crude supplies linked to current Middle Eastern unrest.

Additionally, the eastern-based government of Libya and the National Oil Corporation based in Tripoli announced on Thursday that they would reopen all oilfields and export terminals following the resolution of a leadership dispute within the central bank. This decision concluded a crisis that had severely curtailed oil production.

Both Iran and Libya are OPEC members. In 2023, Iran, which continues to operate under U.S. sanctions, produced approximately 4.0 million barrels per day, while Libya’s output was around 1.3 million barrels per day last year, according to U.S. Energy Information Administration data.