Oil edged higher at the end of a volatile week, as traders weighed tensions in Iran and positive sentiment in wider markets.
West Texas Intermediate settled near $60 a barrel after plunging 4.6% on Thursday, the most since June. President Donald Trump said in a social media post that he “greatly” respects Iran’s decision to cancel scheduled hangings of protesters. His rhetoric over recent days has reduced expectations of an immediate US response to violent protests in the Islamic Republic, which could have led to disruptions to the country’s roughly 3.3 million barrel-per-day oil production, as well as shipping.
Nevertheless, Washington is boosting its military presence in the Middle East. At least one aircraft carrier is moving into the region and other military assets are expected to be shifted there in the coming days and weeks, Fox News reported, citing military sources. Traders have in the past covered bearish wagers ahead of the weekend in periods of heightened geopolitical risks.
“While the risk of imminent intervention from the US against Iran has subsided, it’s pretty clear that the risk is still present, which should keep the market on its toes in the short term,” said Warren Patterson, head of commodities strategy at ING Groep NV. “However, the longer this goes on without a US response, the risk premium will continue to evaporate, allowing more bearish fundamentals to take center stage.”
Disruption to Kazakh exports from the Black Sea, short-term tightness in the North Sea and a host of financial flows from options markets to commodity index rebalancing have also helped lift an oil market coming off its biggest drop since 2020 on rising supplies.
In a sign that lower prices are starting to bite, Harold Hamm, the billionaire wildcatter who helped kick off the US shale revolution, said his firm Continental Resources Inc. is about to shut down drilling in North Dakota’s Bakken region. The move is due to low crude prices, he said.
What Bloomberg Strategists Say:
“Oil below the key $60 level, while supportive for consumers and inflation optics, risks undercutting future barrels by discouraging investment from an industry that remains central to the US economy and politically close to the president’s agenda. Price suppression notably reshapes regional growth and labor outcomes, raising the risk that today’s cheap oil becomes tomorrow’s problem.”
— Brendan Fagan, Macro Strategist, Markets Live.
Elsewhere, the US and Ukraine are set to hold talks in Miami, Florida this weekend, the AFP reported. A long-elusive end to fighting in Russia’s war against Ukraine would represent a major headwind for oil prices.
Oil Prices
WTI for February delivery rose 0.4% to settle at $59.44 a barrel in New York.
Brent for March settlement added 0.6% to settle at $64.13 a barrel.
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