(Investing) – Oil prices advanced on Friday and were on track for sharp weekly gains, as escalating fighting between the United States and Iran kept traders focused on the risk of supply disruptions from the Middle East.
As of 09:47 ET (13:47 GMT), Brent crude futures, the global oil benchmark, had risen 3.0% to $86.79 per barrel, while U.S. West Texas Intermediate (WTI) crude futures had gained 3.5% to $81.65 per barrel, hovering around its highest level since June 15.
Both benchmarks were heading for one-week gains of more than 10% after the latest escalation in hostilities added to the geopolitical risk premium in prices. Still, “there is a lack of urgency in oil circles at present,” said Tamas Varga, analyst at PVM Oil Associates, in a note.
“There have been some quite significant developments without which the experience of the last few months would have crude prices harrying triple digits,” Varga said.
Iran’s military on early Friday said it launched fresh strikes on U.S. facilities in the Middle East, including its first direct attack in Syria.
The move comes after the U.S. military said it launched a sixth consecutive night of strikes on Iran on Thursday which targeted Iranian military capabilities.
Tehran has repeatedly threatened shipping through the Strait of Hormuz, a vital conduit for roughly a fifth of global oil and liquefied natural gas supplies.
Shipping activity through the strait has begun to show signs of slowing once again. Vessel traffic dropped sharply this week, following the reimposition of a U.S. naval blockade on Iranian ports.
Traders are now weighing the chances of prolonged supply disruptions against the prospect that producers could offset part of any shortfall.
Meanwhile, diplomatic efforts are in focus, after reports suggested regional mediators, including Qatar, Egypt and Pakistan, are continuing to pursue talks despite the apparent collapse of a fragile ceasefire deal signed in June.
Elsewhere, U.S. inventory data released this week also pointed to a tightening crude market.
The Energy Information Administration (EIA) said U.S. crude oil stockpiles fell by 1.7 million barrels in the week ended July 10 to 409.7 million barrels, while gasoline inventories declined by 1.5 million barrels.
Earlier in the week, industry data from the American Petroleum Institute (API) showed U.S. crude inventories fell by about 564,000 barrels for the same period, a smaller draw than analysts had expected.
(Ayushman Ojha contributed reporting)
