On Friday, Brent crude and U.S. West Texas Intermediate (WTI) experienced a significant increase, both climbing over $1 a barrel amidst market scrutiny over potential conflicts between Israel and Iran, which could further constrict oil supplies.
The rise in oil prices is marked by Brent crude settling at $91.17 a barrel, up by 52 cents, and WTI finishing at $86.91 a barrel, increasing by 32 cents.
This upward trend in oil prices has brought both benchmarks to their highest levels since October, signaling a notable market shift.
The oil market is poised for over a 4% gain this week, spurred by Iran’s promise of retaliation against Israel following an attack that resulted in the death of senior Iranian military figures.
Analyst Phil Flynn from Price Futures Group highlighted the unprecedented nature of a direct attack from Iran on Israel, underscoring the escalating geopolitical risks.
The tension follows an unclaimed attack on Iran’s embassy compound in Syria, with Israel at the center of speculation.
Contributing to the supply concerns, ongoing drone attacks by Ukraine on Russian refineries have potentially disrupted a significant portion of Russia’s capacity, according to a NATO official.
This situation exacerbates the strain on global oil supplies.
Despite these disruptions, OPEC+ has maintained its oil supply policy, urging member countries to adhere more strictly to output cuts. Analysts from ANZ predict a decrease in oil output and a consequent inventory drawdown in the second quarter due to these tighter controls.
In the U.S., a surge in job growth in March has exceeded expectations, suggesting a robust demand for oil but potentially postponing anticipated cuts in interest rates by the Federal Reserve.
The strong employment numbers, coupled with a steady rise in wages, could indicate sustained oil demand. JPMorgan analysts anticipate a growth in global oil demand by 1.4 million barrels per day in the first quarter.
Meanwhile, the U.S. has seen a reduction in the number of operational oil and natural gas rigs for three consecutive weeks, the first occurrence since October, as reported by Baker Hughes.
This decrease, leaving the rig count at 620, the lowest since early February, serves as an early indicator of future output changes, reflecting the ongoing adjustments within the global oil market.