Oil Prices: Crude Set for 12% Weekly Drop Despite Middle East Supply Risks

Oil prices edged higher on Friday but remained on course for a sharp weekly decline as expectations of a possible de-escalation in the Iran war weighed on the market. However, continued attacks on tankers in the Middle East and concerns over regional supply disruptions provided support for crude prices.

Brent crude futures for January delivery rose $1.29, or 1.31%, to $99.58 a barrel as of 0504 GMT. US West Texas Intermediate (WTI) futures gained 86 cents, or 0.95%, to $91.38 a barrel. Brent briefly crossed the $100 mark during morning trading.

Both benchmarks recorded gains for a second consecutive session. Nevertheless, Brent was heading for a weekly decline of around 12%, while WTI was set to lose 12.1%. The December Brent contract expired on October 30.

Oil prices plunged earlier in the week as investors anticipated that the US midterm elections could pave the way for reduced tensions in the US-Israeli war against Iran, which has entered its ninth month. The elections on Tuesday shifted control of both the Senate and the House of Representatives from President Donald Trump’s Republicans to the Democrats.

Following the Democrats’ sweeping electoral gains, oil prices dropped 8% on Wednesday alone, settling at their lowest levels in two months.

However, the market recovered some ground after a series of tanker attacks in the Gulf and the Strait of Hormuz on Wednesday and Thursday renewed concerns about regional oil supplies. The strategically important waterway serves as a major export route for Middle Eastern oil shipments.

KCM chief analyst Tim Waterer described Friday’s gains as a technical recovery following the steep sell-off triggered by the US elections. He said investors were recognising that the underlying supply risks had not disappeared and that attacks in the Strait of Hormuz remained a concern regardless of the election outcome.

“Until there is a credible path to safer, cheaper transit through the Gulf, oil is likely to remain supported on dips and prone to sharp moves on any escalation headlines,” Waterer said.

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Meanwhile, Iran reported on Thursday that three additional tankers had been attacked in the Strait of Hormuz. Data from Britain’s maritime security agency, the UK Maritime Trade Operations (UKMTO), also indicated that attacks on oil-carrying vessels continued at a pace close to record levels.

The continued security threats highlight the uncertainty surrounding energy shipments from the region, even as expectations of a possible reduction in hostilities have pushed crude prices lower this week.