Oil prices posted the sharpest increase of the last 26 weeks during the week ending Oct. 13, as markets fretted about worsening supply shortages for the remainder of the year due to the ongoing conflict between Palestine and Israel.
International benchmark Brent crude traded at $89.69 per barrel at 15.30 p.m. (1230 GMT) on Friday, increasing by around 6% relative to the closing price of $84.58 a barrel on Friday last week.
West Texas Intermediate (WTI), the American benchmark, was trading at $86.91 a barrel at the same time on Friday, up almost 5% from last Friday's session, which closed at $82.79 per barrel.
Prices started the week skyrocketing over intensified supply concerns caused by the conflict between Palestine and Israel.
Despite Israel's limited contribution to global oil supply, the ongoing conflict between Palestine and Israel is generating fears of the possibility of a regional spillover, endangering infrastructure damage, and consequently deepening the supply deficit predicted for the rest of the year.
Later in the day on Monday, prices drifted lower over easing concerns that the ongoing clashes between Israel and Palestine would have a limited impact on oil trading. Based on reports of Iran’s possible role during the Hamas attack that started late on Saturday, investors chose caution after the US said Monday that it does not have any information to suggest that Iran helped Hamas’ plan.
Prices continued to fluctuate during the week as supply-side shortages remained the focus in oil markets.
Oil prices were allayed on Wednesday after Saudi Arabia, OPEC's swing producer, said it was working with regional and international partners to prevent an escalation and reaffirmed its efforts to stabilize oil markets.
However, Israel’s attacks on the Syrian capital Damascus and the city of Aleppo on Thursday, targeting their airports, again raised concerns that the conflict could escalate.
Moreover, a potential uptick in demand this year, amid a predicted supply deficit, also supported upward price movements on Thursday.
The International Energy Agency (IEA) boosted its 2023 demand growth prediction to 2.3 million barrels per day (bpd) in a monthly report on Thursday, bringing it closer to OPEC's unchanged forecast of 2.4 million bpd.
Meanwhile, the IEA lowered its oil demand growth forecast for next year to around 900,000 bpd, suggesting that 'a harsher economic climate and continued progress in energy efficiency will weigh on oil consumption.' By contrast, OPEC forecasts that demand will rise by 2.2 million bpd next year.
Price increases are persisting as investors fear worsening supply shortages for the remainder of the year.
Meanwhile, US Energy Information Administration data released Thursday showed that the country's commercial crude oil stocks rose by approximately 10.2 million barrels.
A strong increase in inventory implies a fall in crude demand in the US, easing concerns in a market where a supply deficit is expected for the remainder of the year.
By Firdevs Yuksel