Investing.com– Oil prices hit more than five-month highs in Asian trade on Friday and were set for their best week in two months on the prospect of worsening geopolitical conditions in the Middle East, especially amid increased saber rattling between Israel and Iran.
A broader outbreak of war in the Middle East potentially heralds more supply disruptions for oil, and could further tighten markets in the coming months. Expectations of tight markets were furthered by the Organization of Petroleum Exporting Countries and allies (OPEC+) maintaining its current pace of production cuts.
On the demand front, improving economic readings from top importer China saw traders turn more optimistic over stronger oil imports in the country this year.
expiring in June rose 0.4% to $91.02 a barrel- reaching levels last seen in mid-October, while rose 0.3% to $86.08 a barrel by 21:19 ET (01:19 GMT).
Oil prices head for bumper week on prospect of Israel-Iran war
and WTI futures were set to gain between 4.5% and 5% this week- their best performance since early-February.
Prices were boosted chiefly by the prospect of Iran joining the Israel-Hamas war, after Tehran threatened retaliation for what it viewed as an Israeli strike on an Iranian embassy in Syria.
These threats drew a sharp rebuke from Israeli Prime Minister Benjamin Netanyahu. U.S. calls for a ceasefire in Gaza also appeared to have gone unheeded.
Worsening geopolitical conditions in the Middle East stand to potentially disrupt crude production in the oil-rich region, especially if major producer Iran becomes embroiled in a conflict.
Tighter supply outlook also buoys crude
Crude was also buoyed by the prospect of tighter global supplies in the coming months, as major producer Russia cut output in the wake of Ukrainian strikes on several key refineries.
This cut, coupled with the OPEC+ maintaining its current pace of production cuts at a meeting earlier this week, pushed up expectations of lower oil supplies.
While the prospect of tighter markets was somewhat offset by data showing U.S. production remained at record highs last week, a bigger-than-expected draw in U.S. indicated that demand in the world’s largest fuel consumer was also picking up.
Focus was now on key data due later on Friday, for more cues on the U.S. economy.
