Oil's weekly gain tops 9% as traders watch Israel-Iran developments

By Myra P. Saefong and William Watts

Brent crude logs biggest weekly percentage climb in 2 years

Oil futures settled higher on Friday, with U.S. and global benchmark prices posting a gain of more than 9% for the week, as tensions in the oil-rich Middle East continued 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 67 cents, or 0.9%, to settle at $74.38 a barrel on the New York Mercantile Exchange, for a 9.1% weekly rise. Based on the front month, prices marked their largest weekly climb since the week that ended March 31, 2023, according to Dow Jones Market Data.

-- December Brent crude BRN00 BRNZ24, the global benchmark, climbed 43 cents, or nearly 0.6%, at $78.05 a barrel, for a 9.1% weekly gain - the largest since the week that ended Oct. 7, 2022.

-- November gasoline RBX24 added nearly 0.2% to $2.10 a gallon, up 8.8% for the week, while November heating oil HOX24 climbed 0.8% to $2.31 a gallon, up 7.5% for the week.

-- Natural gas for November delivery NGX24 settled at $2.85 per million British thermal units, down 3.9% for the session to lose nearly 1.7% for the week.

Market drivers

Friday was a "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," said Tom Kloza, the global head of energy analysis at OPIS, which is a subsidiary of MarketWatch publisher Dow Jones, in commentary on the rise in oil prices.

Read: Bets oil will hit $100 a barrel surge on fears of wider Middle Eastern war

For the week, Brent and WTI each climbed 9.1%. Prices for both grades of crude gained more than 5% on Thursday, pushing them 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."

In a briefing-room appearance at the White House Friday, however, Biden said that if he were Israel, he'd think about alternatives other than striking Iran oil fields.

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.

The Iranian armed forces' general staff has promised "widespread and comprehensive destruction" of infrastructure within Israel should Iranian territory be attacked, the Wall Street Journal reported Friday. Ali Fadavi, deputy commander of the Islamic Revolutionary Guard Corps, pledged to hit Israeli power stations, gas fields and oil refineries, the report said, citing Iranian state media.

Gains for oil prices on Friday, however, were much more modest compared to Thursday.

"Gains are fleeting and the most likely outcome is plenty of tension but no damage to Iranian export infrastructure," Kloza 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."

Almost unnoticed this week were some OPEC+ meetings that reaffirmed "the cartel's plan to begin releasing more oil (via getting rid of voluntary cuts) in December," said Kloza, along with the resolution of the standoff that had led to reduced Libyan oil output. "If I were a betting person, I would be betting on lower prices in the December 2024 through December 2025 period," he said.

Rob Schroeder contributed.

-Myra P. Saefong -William Watts

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10-04-24 1529ET

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