Oil prices set for big weekly gain as traders await Israel's response to Iranian missile attack

By Myra P. Saefong and William Watts

Brent crude trading over 9% higher for the week

Oil futures headed higher on Friday, with Brent prices on track to post a gain of more than 9% for the week, as tensions in the oil-rich Middle East continue to flare in the wake of Iran's missile attack on Israel earlier this week.

Price moves

-- West Texas Intermediate crude CL00 for November delivery CL.1 CLX24 rose 63 cents, or 0.9%, to $74.34 a barrel on the New York Mercantile Exchange, on track for an 8.8% weekly rise. Based on the front month, prices were poised for their largest weekly climb since the week that ended March 31, 2023.

-- December Brent crude BRN00 BRNZ24, the global benchmark, was up 81 cents, or 1%, at $78.43 a barrel for a 9.4% weekly gain, which would be the largest since the week that ended Oct. 7, 2022.

-- November gasoline RBX24 added 0.2% to $2.0963 a gallon, up about 8.8% for the week, while November heating oil HOX24 climbed 1.2% to $2.3216 a gallon, up 7.9% for the week.

-- Natural gas for November delivery NGX24 traded at $2.894 per million British thermal units, down 2.6% for the session and set to lose 0.2% for the week.

Market drivers

Brent and WTI jumped more than 5% on Thursday, pushing both grades into positive territory for the year. Crude extended gains during that session after reporters asked President Joe Biden if the U.S. would back an Israeli strike on Iranian oil facilities and he replied: "We're discussing that."

The possibility of Israel "targeting Iran's oil infrastructure is definitely raising eyebrows around the world and giving a decent energy boost to oil prices," Ipek Ozkardeskaya, senior analyst at Swissquote Bank, said in a note.

See: Israeli strikes on Iran's 'oil island' could send crude prices soaring

"The upside potential is clearly present, the rising tensions if coupled with the threat of lower Iranian supplies, should give a further reason to the oil bulls to extend their tactical long positions," the analyst said. "But it's important to keep in mind that the gains that are made on the back of geopolitical tensions will - sooner rather than later - be given back."

Read: Oil shock? How OPEC+ could soften the blow if the Middle East conflict hits supply.

Gains for oil prices on Friday, however, were much more modest compared with the last three trading sessions.

"Gains are fleeting and the most likely outcome is plenty of tension but no damage to Iranian export infrastructure," said Tom Kloza, the global head of energy analysis at OPIS, which is a subsidiary of MarketWatch publisher Dow Jones.

Friday is "bellwether day since it represents the last time to cover speculative short or long positions ahead of the weekend, and that generally reflects a fertile ground for prices," he told MarketWatch.

In terms of probability, oil is "approaching a likely top - perhaps Brent may have a cup of coffee at $80 [a barrel] or higher," he said. "Most trading houses and passive and active investors are not willing to chase oil benchmarks higher like they did in 2022 in the wake of the Ukraine invasion."

-Myra P. Saefong -William Watts

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10-04-24 1052ET

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