Oil futures saw a slight rise on Friday, but were still on track for a second consecutive weekly decline. The initial fears of an escalation in the Israel-Hamas conflict have diminished, causing investors to shift their focus back to the demand outlook.
- West Texas Intermediate (WTI) crude for December delivery rose 0.5% to $82.87 a barrel on the New York Mercantile Exchange.
- January Brent crude, the global benchmark, was up 0.3% at $87.13 a barrel on ICE Futures Europe.
Analysts are closely monitoring the Israel-Hamas war for any signs of potential spillover that could involve Iran. Initially, crude prices surged due to concerns that a broader conflict could lead to stricter U.S. sanctions on Iranian crude exports. Furthermore, there were concerns that Iran or its proxies might threaten crucial transportation chokepoints and infrastructure in the region.
While there have been no disruptions to production in the Middle East so far, the oil market remains undersupplied. Therefore, geopolitical risks cannot be completely ruled out at this point, according to Barbara Lambrecht, a commodity analyst at Commerzbank.
Lambrecht believes that the oil price is still well supported due to these factors.
The updated forecast from the U.S. Energy Information Administration (EIA), expected next week, is unlikely to change the overall picture. Although U.S. production could see short-term upward adjustments, it won’t significantly impact the market, the analyst explained.
On the other hand, U.S. gasoline demand has been surprisingly weak lately, falling below its levels from 2020 and 2022. Lambrecht attributes this decline to high gasoline prices, persistent inflation, and improved fuel efficiency. Consequently, the EIA may revise its forecast for U.S. oil demand downward as well.
In conclusion, while oil prices saw a slight increase on Friday, there are underlying factors that suggest a second consecutive weekly fall is likely.