Oil Prices Up Friday But Down Weekly As Rudderless Traders Seek Clarity In Middle East

Worries also abound about Iran's possible involvement in the Israel/Hamas war: File Image/Pixabay

A week of roller coaster price gains and losses based almost entirely on alternating fearful sentiments ended Friday with crude prices rising almost 3 percent, the result of worries that global crude supplies will be disrupted due to the escalating Israel/Hamas war.

In the previous session, traders caused prices to drop due to reports that the U.S. economy grew at its fastest pace in nearly two years in the third quarter, which rekindled fears that the Federal Reserve will keep interest rates high for longer.

Brent on Friday settled up $2.55, or 2.9 percent, at $90.48 per barrel, while West Texas Intermediate settled up $2.33, or 2.8 percent, to $85.54.

For the week, Brent was down about 2 percent and WTI down about 4 percent.

Phil Flynn, senior market analyst at Price Future Group Inc., reiterated his comment in the previous session by noting that "We are at the mercy of the next headline ... and I think that's kind of what we've been seeing today with the price swings."

It could be argued that traders aren't even consistent when focused on a specific worry: for example, earlier on Friday oil prices soared by over $2 after the U.S. struck military targets in Syria; then prices dropped due to reports of mediated talks between Israel and Hamas, only to ultimately rebound due to supply fears – even though Middle East developments have not directly affected oil supplies and many analysts argue that any impact will be short lived.

But Helima Croft, analyst at RBC Capital Markets, pointed out that "[It] remains incredibly difficult even for the most knowledgeable regional watchers to make high conviction calls about the trajectory of the current crisis, as the red lines that could bring more players onto the battlefield remain largely indiscernible."

For its part, Bloomberg observed that "The Middle East war premium in futures is partially masking a recent slump in prices of some physical barrels, suggesting demand may be weakening; global stock markets have also fallen this week, while a gauge of the dollar is near the highest since November, increasing the price of commodities for most buyers."

The news agency further reminded readers that since Hamas conducted the mass slaughter of Israelis several weeks ago, "futures and options markets have been volatile on Fridays as traders try to gauge how to position ahead of the weekend, with any escalation running the risk of price spikes at the following week's market open."

Finally on Friday, and noting that U.S. military airstrikes in Syria lifted Brent above $90 per barrel again this week, Michael Kern, analyst at Oilprice.com, said "Market watchers are now anticipating an Iranian retaliation and a potential escalation into the wider region as Israel begins raids into northern Gaza; yet even with this, oil prices are set for the first week-on-week decline since early October."