Oil prices recovered on Friday, finding support from a stronger potential for supply disruptions due to the escalating conflict between Israel and Iran, although prices are on track for weekly declines amid the prospect of fewer interest rate cuts from the Federal Reserve this year.
June contract Brent crude oil futures gained 1.01% to $90.65 per barrel, while US West Texas Intermediate (WTI) crude futures for the same month delivery climbed 0.94% to $85.24 per barrel.
The increases recuperated the previous session’s losses resulting from concerns over sticky inflation in the world’s largest economy, which weakened expectations of a June rate cut.
Oil Faces Weekly Loss Amid Mideast Tensions, Fewer Rate Cuts
Crude prices have risen nearly 19% on better economic conditions and supply reductions by the Organization of the Petroleum Exporting Countries (OPEC) and its allies.
However, prices remained on track for weekly losses as the global and US benchmarks moved towards a 1% slide on Friday.
Analysts expect a pullback in oil’s rally should Middle East tensions and supply disruptions observe no further intensification, while OPEC’s recent monthly market report aligned with expectations.
Geopolitical tensions in the Gaza war troubled region of the Middle East remained intense after an alleged Israeli attack on an embassy in the capital of Syria prompted a vow of retaliation from Iran.
Israel has not claimed accountability for the assault, but Iran’s Supreme Leader Ayatollah Ali Khamenei stated on Wednesday that Israel needs to be ‘punished’ for the incident.
The US sees Iran launching an attack on Israel but not to an extent that would involve Washington in the fight. Tehran has reportedly indicated a response focused on preventing further escalation of the war.
Israeli Prime Minister Benjamin Netanyahu said they are carrying on with their fight in Gaza, although he declared preparations for possible ‘scenarios’ in other areas.
On the interest rate front, the European Central Bank (ECB) left rates unchanged at 4% on Thursday, although it signaled that it is still poised to trim rates as early as June.
While the ECB’s decision was expected, accompanying statements maintained the potential of monetary policy easing in the near term.
However, the number of Fed officials saying there is no need to hurry with cutting interest rates continues to rise, as prices in the US remained stubbornly high.
Analysts have kept their views of Brent averaging $87.00 per barrel in the second quarter of 2024.
