Crude oil prices saw strong gains during the week ending Jan. 3 with more than a 4% daily increase on Friday due to rising tensions in the Middle East that threaten secure oil supply from the region.
Brent crude was trading at $69 per barrel at 1150 GMT on Friday for a 4.1% daily increase. The international benchmark was heading for a 1.17% weekly gain after it opened Monday at $68.20 a barrel.
American benchmark West Texas Intermediate (WTI) was trading at $63.76 a barrel at the same time for a 4.21% daily gain. WTI was heading for a 3.32% weekly increase after it started Monday at $61.71 per barrel.
Despite thin trading because of the New Year’s Day holiday, WTI fell 1% on Tuesday and Brent crude lost 3.57%. The fall in value was spurred by uncertainty over the contents and details of the phase-one trade deal between the U.S. and China that is due to be signed on Jan. 15 in the White House.
While the world's two largest economies continue to work towards the next phase in the trade deal through 2020, key issues such as technology transfer and intellectual property rights remain unresolved and fuel investor concerns that the world's two biggest oil consumers could negatively impact global oil demand.
On the supply side, the risk of secure crude supply from the Middle East has put upward pressure on oil prices on Friday.
On Thursday, the U.S. carried out a strike that killed Qasem Soleimani, commander of the Iranian Revolutionary Guards Corps’ Quds Force, in the Iraqi capital Baghdad, after thousands of Iraqis stormed the U.S. embassy compound on Tuesday.
Iranian Foreign Minister Javad Zarif called the U.S. killing of Soleimani "extremely dangerous" and a "foolish escalation," and wrote on Twitter "the U.S. bears responsibility for all consequences of its rogue adventurism."
If the tensions between the U.S. and Iran escalate, oil prices could easily be pushed higher, potentially escalating the price of Brent crude to the mid-$75 range, given that the Middle East is home to almost half of the world's proved oil reserves and accounts for one-third of global oil production.
By Ovunc Kutlu