Oil prices are heading for weekly gain, driven by rising tensions in the Middle East
Oil futures fell on Friday, but significant weekly gains of over 10% are expected amid concerns about disruptions to energy flows across the Red Sea and a further escalation of the US-Israel conflict against Iran.
As of 06:48 GMT, Brent futures were down $1.12, or 1.11%, at $99.55 a barrel. They had surged 7% in the previous session, reaching over $100 for the first time since May. The contract is on track for a 13% weekly increase.
WTI futures were trading at $91.06 a barrel, down $1.12, or 1.21%, and are on track for a 10.4% weekly gain.
The potential supply disruptions the market is currently facing are at their highest level during the war. With oil flow through the Strait of Hormuz almost completely halted, there are also clear risks for Saudi oil flows from the Red Sea.
It is unclear how much further escalation and fears of expanding conflict in the Gulf and Red Sea will impact oil supply.
According to ship tracking data, the number of tankers passing through the Strait of Hormuz dropped to just one on Thursday, the lowest level since May 7.
The Bab el-Mandeb waterway controls access from the Red Sea to the Indian Ocean and is the second most important oil channel after the Strait of Hormuz. But it too is under threat.
Iran has been pressuring the Houthis to close Bab el-Mandeb, its gateway to the Red Sea, if the US continues its attacks on Iranian energy infrastructure, following the collapse of a temporary ceasefire between the two countries two weeks ago.
The pro-Iranian Houthis announced on Monday that they would impose a naval blockade on Saudi Arabia. Saudi Arabia was diverting its oil via pipeline due to Iran's closure of the Strait of Hormuz.
Another supply threat is in the Black Sea.
On Thursday, Kazakhstan's Energy Ministry announced that oil companies had temporarily reduced production after the country's main Black Sea export terminal was shut down due to suspected Ukrainian drone attacks.
The Caspian Pipeline Consortium halted oil purchases from Kazakhstan after suspending shipments due to attacks on tankers at the terminal, according to industry sources on Tuesday. This pipeline supplies approximately 2% of the world's daily crude oil supply.
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