Investing.com — Oil prices rose Friday, as well as heightened tensions in the Middle East raised the prospect of supply disruptions from the vital oil-producing region.
By 09:25 ET (14.25 GMT), the futures traded 2.1% higher at $86.78 a barrel and the Brent contract climbed 1.7% to $91.26 a barrel.
Middle East tensions rise
U.S. officials have predicted an attack by Iran against Israel, possibly over the weekend, in retaliation for a suspected Israeli air strike against a top Iranian military commander in Damascus earlier this week.
This would increase the risk that Iran, the third-largest producer in the Organization of the Petroleum Exporting Countries and a major backing of Hamas in its conflict with Israel in Gaza, will be dragged into the battle, potentially hitting crude supplies from the region.
“The risk of a geopolitical event occurring during the weekend is once again lifting the risk premium ahead of the weekend only to drop again on Monday,” said Saxo Bank’s Ole Hansen.
Additionally, the war between Russia and Ukraine continues, with Russian drones causing a fire at an energy facility in southern Ukraine overnight.
Since late March, Russia has launched multiple major attacks on Ukrainian energy infrastructure, dealing significant damage to the Ukrainian power system and causing emergency power cuts in some regions.
IEA cuts oil growth forecast
That said, the benchmark oil contracts are set to end the week largely unchanged as sticky U.S. inflation pointed to the Federal Reserve keeping interest rates at high levels for longer than previously expected, potentially hitting activity in the world’s largest economy.
U.S. oil grew 5.8 million barrels in the week to April 5, much more than expectations for a build of 0.9 million, keeping supplies at the highest level since July.
The build marked a third consecutive week of outsized growth in U.S. inventories, while an unexpected build in gasoline inventories also pointed to some cooling in fuel demand.
Additionally, the cut its forecast for oil demand growth this year, by around 100,000 barrels per day to 1.2 million barrels per day, in its latest monthly report, released earlier Friday.
The global energy watchdog also said that it expected the pace of expansion to decelerate even further to 1.1 million barrels per day next year “as the post-Covid 19 rebound has run its course.”
Pullback is a possibility
If the threat of a disruption to global supplies doesn’t materialize, the bears will likely emerge from hiding in the second half of the year, according to Macquarie.
“We expect oil to turn bearish as the year progresses due to NOPEC supply growth, a material amount of OPEC+ spare capacity reentering the market, and the potential that continuing inflation softens demand,” analysts at Macquarie said in a note.
The threat of supply disruptions from geopolitical tensions is enough in the near-term, however, to support oil prices, but “without an actual supply disruption associated with geopolitical events, will struggle to hold above $90 a barrel in the second half of the year,” Macquarie added.
