Oil Trading Muted As The Effect Of Israeli Strike On Iran "Fading"

However, Gulf states are scrambling to dissuade the strike from happening: File Image/Pixabay

Oil on Friday logged another weekly gain, this time by about 1 percent, but declined for the day – albeit minimally – as everything from Hurricane Milton to Middle East hostilities and Libya caused conflicting sentiment for investors and rendered them rudderless.

Brent settled down 36 cents at $79.04 per barrel, and West Texas Intermediate settled down 29 cents to $75.56 per barrel.

The issue over the devastation to Florida caused by Hurricane Milton was that it would impact fuel demand in that state; but this was buffered by ongoing worries of a supply shortage if Israel’s vowed retaliation against Iran for earlier rocket attacks would lead to all-out war between the two countries.

For the record, Gulf states including Saudi Arabia were lobbying Washington to stop any such retaliation due to concerns  their own oil facilities could come under fire from Tehran's proxies.

Helima Croft, head of global commodity strategy at RBC Capital Markets, told clients, “We expect that the White House is potentially encouraging Israel to target refineries instead of oil export facilities, arguing that the economic impact would be more directly felt by Iran.”

As for Libya’s role in influencing trading, its National Oil Corporation announced that it had restored oil production to levels before its central bank crisis.

Largely overlooked in Friday’s analysis of global market health was the Organization of Petroleum Exporting Countries’ (OPEC) earlier assurance that it has enough spare oil capacity to make up for any loss of Iranian supply resulting from an Israeli strike; it fell upon Reuters to point out that "much of that spare capacity is in the Gulf region, so if oil facilities in Saudi Arabia or the United Arab Emirates were targeted too, the world could face an oil supply problem.”

Despite what seems to be geopolitical chaos, Natasha Kaneva, head of global commodities strategy at JP Morgan, told clients in a note, “Sustaining bullish price momentum in oil has proven to be a high maintenance task: without additional catalysts, the ‘war’ and ‘stimulus’ premiums have shown easy susceptibility to fading.”

In other oil news on Friday and something viewed as yet more evidence of lagging demand, BP announced that lower margins from processing crude will harm earnings by $400 million to $600 million; this was on the heels of similar projections from Exxon Mobil Corp. and Shell.