Putin's Warning To The West Spurs 6% Weekly Rise For Oil

But risks regarding Iran and tough-minded Trump are being ignored: analysts: File Image/Pixabay

Oil on Friday managed a weekly rise of about 6 percent as well as a 1 percent increase for the day, largely due to intensifying hostilities between Russia and Ukraine triggered earlier by Washington allowing the latter to strike deeper into the former Soviet Union with U.S. and British-made missiles.

Brent settled up 94 cents at $75.17 per barrel, while West Texas Intermediate settled up $1.14 at $71.24.

The Kremlin on Friday said  a retaliatory strike on a Ukraine military facility using a hypersonic ballistic missile was a message that it will respond harshly to any "reckless" actions by the West.

Kremlin spokesman Dmitry Peskov told reporters, "The Russian side has clearly demonstrated its capabilities, and the contours of further retaliatory actions in the event that our concerns are not taken into account have been quite clearly outlined."

Russian president Vladimir Putin said his country will continue to test its hypersonic missiles and have a stock ready for use.

Ole Hansen, analyst at Saxo Bank, remarked, "The Russia-Ukraine escalation has raised geopolitical tensions beyond levels seen during the year-long conflict between Israel and Iran-backed militants."

But crude traders were accused of downplaying another geopolitical risk: Bob McNally, president of Rapidan Energy Group, said the oil market is "still complacent" about the risks of heightened tensions between the U.S. and Iran, and he pointed out that "The next administration's priority will be to leverage Iran's vulnerability to oil sanctions and get to a deal" on nuclear activities.

He said at worst the sanctions could curtail Iranian oil exports by 1 million to 1.2 million barrels per day (bpd); however, this might also force pundits to adjust their predictions of a global oversupply for next year and presumably energize the bulls.

The implications of another Donald Trump presidency didn't seem to overly influence J.P. Morgan, which on Friday stated in a note that it expects Brent to average $73 per barrel in 2025, with global demand growth decelerating from 1.3 million bpd this year to 1.1 million bpd next year; the bank also said large surpluses will cause Brent to plummet below $60 by the end of 2026 – by which time India will succeed China in leading oil demand growth.

Goldman Sachs was of another mindset: its analysts stated in a note, "Our base case is that Brent stays in a $70-85 range, with high spare capacity limiting price upside, and the price elasticity of OPEC and shale supply limiting price downside; however, the risks of breaking out are growing."

They went on to note that those risks were if the U.S. enforces stricter sanctions on the Iranian oil industry and exports.