Geopolitical Risk and Hurricane Milton Push Oil Prices Toward a Weekly Gain
Crude oil prices have been on a retreat towards the end of the week but still look set to book another weekly gain, supported by the situation in the Middle East and worry about the security of supply.
In a fresh update, Reuters reported that Gulf states were lobbying with Washington to convince Israel not to target Iranian oil sites on fears that this would prompt retaliatory attacks by Iran-affiliated groups on those Gulf states’ own oil infrastructure.
“The Iranians have stated: ‘If the Gulf states open up their airspace to Israel, that would be an act of war’,” a Saudi analyst close to the kingdom’s ruling family told Reuters.
“The Gulf states aren’t letting Israel use their airspace. They won’t allow Israeli missiles to pass through, and there’s also a hope that they won’t strike the oil facilities,” an unnamed source from the Gulf said. The oil kingdoms had made it clear earlier that they would not be taking a side in that war.
The possibility of such a development has clear bullish implications for the price of oil in the case of an oil-focused escalation, especially in light of Israel’s apparent decision not to consult the U.S. on everything it does on the battlefield and outside it.
Hurricane Milton also helped push oil prices higher this week after it made landfall in Florida, although it did not wreak the devastation expected from a Category 5 hurricane as it lost a lot of its destructive power before landfall.
“Investors are evaluating how hurricane damage might impact the U.S. economy and fuel demand,” NS Trading president Hiroyuki Kikukawa told Reuters. “Oil prices are likely to hover around the current 200-day average levels, with the primary concern being whether Israel will retaliate against Iranian oil facilities.”
Benchmarks added some 3% on Thursday as Israel’s government met to discuss its retaliatory move against Iran. Earlier on Friday, Brent crude was hovering around $80, with West Texas Intermediate above $75 per barrel.