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Oil ends Friday below the day’s highs as panic eases over Israel’s retaliation against Iran

Iranian flag with stock graph and an oil pump jack miniature model are seen in this illustration taken October 9, 2023. REUTERS/Dado Ruvic/Illustration
WTI, Brent oil finish lower for the week. Iranian flag with stock graph and an oil pump jack miniature model are seen in this illustration taken October 9, 2023. Reuters/Dado Ruvic/Illustration

Myra P. Saefong and Barabara Kollmeyer, MarketWatch

SAN FRANCISCO/NEW YORK
Energiesnet.com 04 19 2024

Panic overnight gave way to “calmer heads” on Friday, with oil prices easing back from overnight highs to finish with more modest gains following an apparent retaliatory attack by Israel on Iran.

Price action

  • West Texas Intermediate crude for May delivery CL.1, -1.35% CL00, -1.62% CLK24, -1.35% rose 41 cents, or 0.5%, to settle at $83.14 a barrel on the New York Mercantile Exchange ahead of the contract’s expiration at the end of Monday’s session. For the week, the contract is down 2.9%, according to Dow Jones Market Data.

  • June Brent crude BRN00, -1.50% BRNM24, -1.50%, the international benchmark, added 18 cents, or 0.2%, to end at $87.29 a barrel, after ending slightly lower Thursday at $87.11 a barrel, the lowest price since March 27. For the week, Brent is down 3.5%.

  • May gasoline RBK24, -1.11% fell 0.1% to $2.71 a gallon, down 3.3% for the week.

  • May heating oil HOK24, -1.31% settled at $2.54 a gallon, up 0.3% but losing 5.4% for the week.

  • Natural gas for May NGK24, -1.43% declined 0.3% to $1.75 per million British thermal units, losing 1% for the week.

Market drivers

Oil hasn’t really rallied because there “hasn’t been any increased risk to high-production countries in the region,” with Saudi Arabia, the United Arab Emirates and Iraq staying out of the fray, Gary Cunningham, director of market research at Tradition Energy, told MarketWatch. “Really, only Iran’s barrels are at risk, and that would only be if wider hostilities broke out.”

Israel retaliated Monday against Iran’s drone-and-missile attack last weekend with what appeared to be a limited strike on Iran, the Wall Street Journal reported, citing people familiar with the matter.

The extent and impact of the Israeli action was unclear, although Iran’s state-run news agency, IRNA, said Friday morning that its reporters hadn’t seen any large-scale damage or explosions anywhere in the country, according to the Journal.

Reports of explosions in a western Iranian city had initially sent U.S. crude around 4% higher and Brent trading near $90 a barrel.

“Oil prices rose on the surprise attack, but such conflict has no impact on oil-market fundamentals,” Anas Alhajji, an independent energy expert and managing partner at Energy Outlook Advisors, told MarketWatch.

The market has been concerned about the potential for Iran to close the Strait of Hormuz, a sea passage between the Persian Gulf and the Gulf of Oman that is considered the world’s most important oil-transit chokepoint.

“Iran cannot close the Hormuz Strait, and it is not in its interest to close it,” Alhajji said. “The strait is the lung of Iran.”

The International Atomic Energy Agency said there was no damage to Iran’s nuclear sites.

For about three hours last night, “oil traders feared the conflict between Israel and Iran was boiling over into a full-blown war, but [it] appears calmer heads prevailed,” StoneX’s Kansas City energy team, led by Alex Hodes, said in a Friday client note. “It’s clear this was a pragmatically de-escalatory strike — if that makes any sense,” they said. 

On X, Yonatan Touva, a senior analyst at Mitvim, a think tank in Tel Aviv, wrote, “A ‘de-escalatory strike’: Barring any unexpected developments, Israel’s strike inside #Iran earlier today may well merit the coinage of this new term.”

Oil’s latest price move “highlights how sensitive it remains to geopolitical tensions in the Middle East, which could endanger a third of global supply,” Lukman Otunuga, manager for market analysis at FXTM, told MarketWatch. “Geopolitical jitters are likely to keep markets edgy, and this may be reflected in oil prices.” 

The week ahead will be “jam-packed with top-tier economic data” and corporate earnings, but oil traders may focus on the incoming U.S. first-quarter gross domestic product and the personal-consumption expenditures report, which could impact Federal Reserve rate-cut bets, he said.

For oil, that’s significant because lower interest rates could stimulate economic growth, which fuels oil demand, Otunuga said. “Putting all of this into consideration, oil could see more volatility in the week ahead,” he noted.

marketwatch.com 04 19 2024

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