Oil Prices Achieve Weekly Gains of Up to 9%
Oil prices fell on Friday but posted weekly gains of around 9%, while diesel prices in the United States hit an all-time high as escalating attacks at two major shipping routes in the Middle East fueled fears of prolonged supply disruptions.
Brent crude futures fell $3.02, or 2.81%, to settle at $104.61 per barrel, but still recorded weekly gains exceeding 8.6%. U.S. West Texas Intermediate crude dropped $2.43, or 2.37%, to $100.05 per barrel, though it rose 9.4% for the week. Both benchmarks reached their highest levels since mid-May earlier in the session, but those gains were erased after the Financial Times reported that foreign ministers from Middle Eastern countries were attempting to reach a temporary agreement with Iran to manage shipping traffic through the Strait of Hormuz.
Both crude benchmarks had surged more than 6% on Thursday following escalating attacks on regional shipping, but traders reassessed risks on Friday.
“The panic-inducing factors from yesterday are fading,” said Phil Flynn, analyst at Price Futures Group. “The question is: Will the market remain calm at the start of next week? Events often happen at that time.”
The report about talks on the future of the Strait of Hormuz had the greatest impact on market sentiment.
“Some news suggesting the possibility of new talks in the Middle East put moderate pressure on oil prices on Friday,” said Giovanni Staunovo, energy analyst at UBS. “I still see short-term risks pushing oil prices higher, but we should also expect continued sharp price volatility.”
Before the war in Iran broke out in late February, the strait saw the passage of about 120 cargo ships, in addition to five daily shipments of global oil and liquefied natural gas.
Meanwhile, two European Central Bank policymakers said they did not rule out further interest rate hikes if energy prices remain elevated due to the war and push up other prices in the eurozone.
According to GasBuddy, a fuel price tracking service, the average U.S. diesel price surpassed $6 per gallon last Thursday for the first time ever, amid shrinking supplies resulting from Iran’s war and Ukrainian attacks on Russian refineries.
“Refined products, particularly diesel, are currently facing a double blow as long as shipping restrictions remain in the Gulf region and disruptions to Russian refineries persist,” said Tim Waterer, chief market analyst at KCM Trade. “Diesel and other refined products are likely to rise more than the broader crude market.”
Commerzbank raised its year-end Brent forecast to $85 per barrel from $75, and increased its diesel forecast to $1,200 per ton from $950, and jet fuel forecast to $1,230 per ton from $980.
