Oil falls but head for 8pc weekly gain
HOUSTON: Oil prices fell on Friday but remained on course for a weekly gain of more than 8 percent, while US diesel prices hit a record high as attacks along Middle East shipping routes stoked concerns about prolonged supply disruptions. Brent crude futures settled at USD104.61 a barrel, down USD3.02, or 2.81 percent. US West Texas Intermediate crude finished at USD100.05 a barrel, down USD2.43,…
Oil prices slipped on Friday, but they were still on track for a weekly increase of over 8 percent, according to market reports. The US diesel prices hit a record high as fears of supply disruptions due to attacks in Middle East shipping routes grew. Brent crude futures closed at $104.61 a barrel, down $3.02, or 2.81 percent, while US West Texas Intermediate crude settled at $100.05 a barrel, falling $2.43, or 2.37 percent. Both benchmarks reached their highest levels since mid-May before reversing early gains.
The report of potential talks in the Middle East regarding Iran's role in managing shipping through the Strait of Hormuz had a significant impact on market sentiment. Phil Flynn, a senior analyst from the Price Futures Group, noted that the easing of panic on Friday raised questions about whether the market would remain calm over the weekend.
While the news of possible talks offered some relief, a report indicated that a pumping station on Saudi Arabia's East-West Pipeline, a critical infrastructure for the country's crude exports, had been damaged by militants. This development kept prices lower, with Andrew Lipow, president of Lipow Oil Associates, expressing surprise at the oil market's continued decline despite the reported attacks on the pipeline.
Saudi Arabia's crude supply decreased by 2.3 million barrels per day in August, marking the lowest level in over three decades, as reported by the International Energy Agency. This decline is mainly attributed to attacks on Saudi energy facilities. Additionally, Yemen's Houthis recently reached the island of Perim in the Bab el-Mandeb Strait, potentially tightening their control over a vital shipping route.
Iran claimed it had attacked 10 ships near the Strait of Hormuz on Wednesday, following the US attack on five Iranian oil tankers. Iran's Islamic Revolutionary Guard Corps threatened to escalate its response to any further attacks. Vessel transits at the Strait of Hormuz dropped to seven on Thursday from 11 the day before, according to preliminary ship-tracking data released on Friday.
The strait had previously transported about 125 commodity vessels and one-fifth of global daily oil and liquefied natural gas supplies before the Iran war began in late February.
Two European Central Bank policymakers suggested on Friday that further interest rate increases might be necessary if a war-induced rise in energy prices persists and pushes up other prices in the euro zone. Supply disruptions resulting from the Iran conflict, coupled with Ukrainian attacks on Russia's refineries, contributed to the US national average diesel price surpassing $6 a gallon for the first time on Thursday, according to GasBuddy.
Analysts predicted that as long as Gulf shipping constraints and Russian refining outages persisted, refined products, including diesel, were likely to experience a higher upside potential than the broader crude market.
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