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Oil prices inched up during early Asian trading hours on Friday, maintaining strong weekly gains as investors evaluated the potential impact of the Middle East conflict on global crude supplies. Despite concerns about possible disruptions, the oil market remains well-supplied.
Brent crude futures rose by 9 cents, or 0.12%, reaching $77.71 a barrel as of 0010 GMT. U.S. West Texas Intermediate (WTI) crude futures also saw a slight increase of 8 cents, or 0.11%, to $73.79 a barrel.
Both oil price benchmarks are on track to record weekly gains of around 8%.
Middle East Conflict's Impact on Oil Prices
President Joe Biden indicated on Thursday that the U.S. is considering strikes on Iran's oil facilities as a response to Tehran's missile attack on Israel. This statement led to a 5% rally in oil prices, driven by fears of possible supply disruptions in the Middle East, which accounts for about a third of the global oil supply.
According to ANZ analyst Daniel Hynes, the market has begun pricing in the likelihood of these potential disruptions. "The move has been exacerbated by bearish investors unwinding their bets on lower prices," Hynes noted. "The trend could continue if investors begin building bullish positions in oil."
OPEC's Role in Balancing Oil Prices
While concerns about supply disruptions have driven up oil prices, they have been somewhat mitigated by the spare production capacity within OPEC and the fact that global crude supplies have not yet been directly affected by the unrest in the Middle East.
The reopening of oilfields and export terminals in Libya has also played a stabilizing role. Libya's eastern-based government and the Tripoli-based National Oil Corporation announced on Thursday that they had resolved a leadership dispute over the central bank, ending a crisis that had significantly reduced oil production.
Both Iran and Libya are OPEC members. In 2023, Iran, under U.S. sanctions, produced around 4.0 million barrels per day (bpd) of fuel, while Libya's oil production stood at approximately 1.3 million bpd last year, based on data from the U.S. Energy Information Administration.
