Oil prices rose on Friday as investors closed short positions and amid concerns about a possible US military strike on Iran
Oil prices surged ahead of the three-day Martin Luther King holiday weekend in the US, as some investors closed short positions and amid ongoing concerns about a possible US military strike on Iran.
Reference prices reached their highest levels in recent months this week. Brent crude closed up 37 cents, or 0.58%, at $64.13 a barrel. WTI crude closed up 25 cents, or 0.42%, at $59.44 a barrel.
Most of Friday's gains came from supply buying ahead of the extended weekend. Potential new supply from Venezuela is limiting price increases. The underlying balance still points to ample supply.
The USS Abraham Lincoln aircraft carrier group of the US Navy is expected to arrive in the Persian Gulf next week following its operations in the South China Sea. Till that aircraft carrier strike group's move into the Gulf, nothing is likely to happen anytime soon.
These concerns are countered by potential supply increases from Venezuela, which are also suppressing price increases. The supply from Venezuela hasn't yet reached the expected magnitude.
Friday's buying was driven by investors not wanting to be caught in a supply shortage during the long weekend.
Both indicators reached their highest levels in recent months this week after Trump hinted at the possibility of military intervention in Iran, but fell by over 4% on Thursday after Trump said Tehran was easing its crackdown on protesters, reducing concerns about a possible military intervention.
Concerns remain about a possible Iranian blockade of the Strait of Hormuz, through which about a quarter of the world's seaborne oil supply passes.
If signs of easing appear on this front, developments in Venezuela are likely to resurface. Venezuelan oil, recently sanctioned or blocked, would gradually begin flowing into the global market.
Analysts expect higher supply this year, which could put a ceiling on the geopolitical risk premium on prices.
Despite constant mention of geopolitical risks and macroeconomic speculation, the underlying balance still points to ample supply.
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