Oil prices edged higher on Friday, but the recovery is doing little to reverse a steep weekly decline as hopes of easing tensions in the Iran war clash with fresh fears over Middle East oil supplies.
Brent crude futures for January delivery rose $1.29, or 1.31 percent, to $99.58 a barrel by 0504 GMT. US West Texas Intermediate (WTI) gained 86 cents, or 0.95 percent, to $91.38. Brent briefly crossed the $100 mark during morning trading.
Despite the gains for a second consecutive session, both benchmarks remain on course for weekly losses of around 12 percent. Brent is heading for a 12 percent decline, while WTI is set to lose 12.1 percent.
The sell-off gathered pace earlier this week after US President Donald Trump’s Republican Party suffered major losses in Tuesday’s midterm elections, with Democrats taking control of both chambers of Congress.
The result fuelled expectations that political pressure on Trump could encourage a shift towards easing the US-Israeli war against Iran, which has now entered its ninth month.
Oil prices fell 8 percent on Wednesday alone, settling at their lowest levels in two months as traders began pricing in the possibility of reduced tensions and fewer disruptions to regional supplies.
But the optimism has run into a familiar problem: the threat to oil shipments through the Gulf remains.
A fresh wave of attacks on tankers on Wednesday and Thursday brought supply concerns back into focus, helping prices recover some of their earlier losses.
The Strait of Hormuz, a critical shipping route for a large share of the world’s Middle Eastern oil supplies, remains particularly vulnerable. Any disruption there could quickly tighten global supplies and push prices higher.
Iran said on Thursday that three more tankers had come under attack in the strait. Data from Britain’s maritime security agency, UKMTO, also indicated that attacks on oil-carrying vessels were continuing at close to record levels.
Tim Waterer, chief market analyst at KCM, described Friday’s gains as a technical recovery following the heavy selling triggered by the US election results.
However, he said traders were also recognising that the underlying supply risks had not gone away. Attacks in the Strait of Hormuz, he noted, had continued despite the Democrats’ election victory.
Until there is a credible route towards safer and cheaper shipping through the Gulf, oil prices are likely to find support when they fall, while remaining vulnerable to sudden jumps whenever tensions escalate.
The market is caught between two competing forces: hopes that the war could move towards de-escalation and the continuing threat to one of the world’s most important oil shipping routes.
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