“Oil Prices Hold Steady Amid Middle East Tensions and Production Concerns”
Oil prices remained relatively stable on Friday, poised for weekly gains, as geopolitical tensions in the Middle East persisted following Israel’s rejection of a ceasefire offer from Hamas. Brent crude futures experienced minimal change, slipping 1 cent to $81.62 a barrel, while U.S. West Texas Intermediate crude futures edged up 3 cents to $76.25 a barrel.
The previous session saw both benchmarks climb around 3%, fueled by Israeli airstrikes on the southern border city of Rafah after Prime Minister Benjamin Netanyahu dismissed a proposal to end the conflict in the Palestinian enclave. These ongoing tensions have kept oil prices elevated, with Brent and WTI both set to achieve gains of more than 5% for the week.
Despite the recent surge, Warren Patterson, ING’s head of commodities research, noted, “The move yesterday seemed a bit excessive on the back of not very much at least in terms of fundamentals.” He anticipates that the current pattern of rangebound trading will persist due to the favorable oil balance.
While U.S. officials expressed concerns about civilian casualties in Gaza, Hamas initiated ceasefire talks with mediators Egypt and Qatar in Cairo. However, the conflict has not impacted oil production. Non-OPEC output from Norway and Guyana is on the rise, and Russia is exporting more crude than initially planned for February, despite commitments under the OPEC+ pact.
Under the OPEC+ agreement, Russia pledged to cap crude output at 9.5 million barrels per day and reduce crude and fuel exports. However, a combination of drone attacks and technical outages at Russian refineries has led to increased crude exports, potentially undermining the pact’s objectives.
Additionally, deflation risks in China, the world’s largest crude oil importer, are dampening global oil prices. Analyst Tony Sycamore from IG attributed lower crude oil prices in Asia to early weakness in China’s equity markets and concerns following disappointing CPI figures.
In summary, while geopolitical tensions in the Middle East continue to support oil prices, concerns about production levels and economic indicators are contributing to market fluctuations.