Oil prices pulled back on Friday after a sharp Thursday rally, as traders weighed a Wall Street Journal report of a possible U.S. military buildup against Iran alongside signs that Gulf supply flows are recovering. WTI crude slipped 0.8% while Brent fell 0.7%, with the Strait of Hormuz remaining the market's central worry.
Oil prices eased on Friday as investors balanced the risk of a wider U.S.-Iran confrontation against evidence that some Middle East supply has started flowing again. WTI crude futures slipped 0.8% to $92.17 a barrel, while Brent Oil futures expiring in December fell 0.7% to $101.61 a barrel as of 02:35 ET.
Thursday's rally cools
The pullback follows a sharp surge a day earlier, when Brent and WTI jumped more than $4 and $2 a barrel respectively. That move came after a Wall Street Journal report that Washington was weighing sending another aircraft carrier group and additional troops to the Middle East, stoking concern that renewed military action against Tehran could threaten regional oil flows. Traders have since kept their focus on the Strait of Hormuz, a key shipping route for global energy supplies, even as fears of an immediate disruption eased somewhat.
Gulf exports show signs of recovery
Saudi Arabia has restarted operations on its East-West Pipeline and resumed tanker loadings from Yanbu after earlier disruptions, helping regional exports recover. Markets, however, remain sensitive to any disruption to tanker traffic or regional infrastructure given the unresolved tension.
Adding a separate strain to the market, Chinese refiners have suspended fuel exports beyond Hong Kong and Macau in October, a move expected to tighten global markets for refined products including diesel, jet fuel and gasoline. The decision comes as global diesel markets remain under pressure from reduced Russian exports and concerns over possible restrictions on U.S. fuel shipments. The U.S. has reportedly urged European countries to consider releasing emergency diesel reserves to ease the strain on fuel markets.
Limited room to run higher
Despite Thursday's rally, analysts noted that recovering Middle East supply and concerns about global demand have limited further upside for crude. Investors are also watching how higher energy prices feed into inflation expectations and central bank policy, since a sustained rise in crude prices could complicate efforts by policymakers, including the U.S. Federal Reserve, to balance growth concerns against inflation risks.
Source: Commodities & Futures News
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