Crude oil prices headed towards a more than 5% weekly decline on Friday losing gains made during the week ending Jan. 10 with the easing of U.S.-Iran tension in the Middle East.
Home to almost half of the world's proved oil reserves and one-third of global oil production, secure supply from the Middle East was perceived riskier by investors after the U.S. confirmed on Jan. 2 that it carried out a strike that killed Qasem Soleimani, the commander of the Iranian Revolutionary Guards Corps’ Quds Force, in Iraq.
U.S. President Donald Trump's remarks further escalated the tension on Sunday Jan. 5 as he wrote on Twitter "... Should Iran strike any U.S. person or target, the United States will quickly & fully strike back, & perhaps in a disproportionate manner."
International benchmark Brent crude opened the week on Monday Jan. 6 at $69.35 per barrel and posted a daily gain of 0.45%, surpassing the key threshold of $70 a barrel. American benchmark West Texas Intermediate (WTI) started the week at $63.71 a barrel, recording a 0.35% daily increase.
On Wednesday Jan. 8, Iran's Islamic Revolutionary Guard Corps (IRGC) launched more than a dozen ballistic missiles against U.S. military and coalition forces in Al-Asad and Erbil in Iraq.
Iranian Foreign Minister Javad Zarif said Tehran "concluded proportionate measures" in response to the U.S. killing of Soleimani last week, adding "We do not seek escalation or war, but will defend ourselves against any aggression."
Brent crude rose to as high as $71.75 per barrel early Wednesday, passing the milestone of $70 a barrel for the second time this week, while WTI climbed to as much as $65.65 a barrel.
Crude prices, however, decreased later Wednesday with remarks from the head of the Organization of Petroleum Exporting Countries (OPEC), which calmed the oil market over security and supply concerns. Both benchmarks closed that day with more than a 4% contraction.
Late Wednesday, Trump said "Iran appears to be standing down, which is a good thing for all parties concerned," adding "No Americans were harmed in last night's attack by the Iranian regime."
From these remarks, investors perceived that for the moment U.S.-Iran tensions would not grow any further.
Brent crude was trading at $65.53 per barrel at 1245 GMT, heading for a 5.5% weekly loss while WTI was trading at $59.67 a barrel while heading for a 6.32% weekly decline.
By Ovunc Kutlu