Oil capped a third weekly gain as the US imposed fresh sanctions on Iran after a missile test and OPEC reached about 60 percent of its output reduction target.
Futures climbed 0.5 percent in New York.
The new restrictions were announced as US President Donald Trump seeks to punish Tehran for its ballistic missile program after warning the country that it was “playing with fire.”
OPEC last month cut output by 840,000 barrels per day, a Bloomberg survey found.
“This is a knee-jerk reaction,” Winchester, Massachusetts-based Strategic Energy & Economic Research president Michael Lynch said by telephone. “Whenever there are headlines that have something to do with the Persian Gulf, you will see a response in the market.”
After posting the biggest annual gain in seven years last year, oil has fluctuated in the mid-US$50s in a tug-of-war between OPEC cuts and signs of recovering US output. While producers from Saudi Arabia to Angola have implemented cuts and Russia has said it was ahead of schedule with its own reduction, wary investors are also considering that US shale drillers are boosting activity.
West Texas Intermediate for delivery next month increased US$0.29 to US$53.83 per barrel on the New York Mercantile Exchange. Total volume traded was about 27 percent below the 100-day average. Prices rose 1.2 percent this week.
Brent for April settlement advanced US$0.25, or 0.4 percent, to US$56.81 per barrel on the London-based ICE Futures Europe exchange. It closed at a US$2.34 premium to April West Texas Intermediate. The global benchmark rose 2.3 percent this week.
The Trump administration has sought to take a harder line on Iran, banning its citizens from entering the US and accusing the nation of interfering in the affairs of US allies in the Middle East. However, the sanctions announced on Friday were limited in scope, serving mostly as a warning signal.
OPEC last month pumped 32.3 million barrels per day, the Bloomberg survey found. The 10 members of the group that pledged to make cuts implemented 83 percent of those reductions on average, but their efforts were offset by gains from Iran, Nigeria and Libya.
Accounting for the members who raised output and Indonesia’s suspension, OPEC’s total production remains 550,000 barrels per day above the target set out in a deal reached on Nov. 30 last year. That means the group as a whole is only about 60 percent of the way toward the level it deems necessary to eliminate the global surplus and boost prices.
Gold futures rose, capping the biggest weekly gain in more than seven months, as slower US wage growth eased concern that rising inflation would spur the US Federal Reserve to move more aggressively in boosting interest rates.
The jobless rate rose to 4.8 percent and average hourly earnings grew 2.5 percent from January last year, the weakest since August last year, a US Department of Labor report showed on Friday in Washington.
Last month’s 227,000 increase in payrolls followed a 157,000 rise in December last year. The median forecast in a Bloomberg survey of economists called for a 180,000 advance.
Bullion has rebounded this year after the biggest quarterly drop in more than three years, helped by speculation that the Fed will be more cautious in raising interest rates amid uncertainty over the impact of Trump’s policies.
Traders see a 28 percent chance that policymakers will tighten monetary policy next month. That was down from about 30 percent before the US data was released, Fed fund futures data showed.
“The market is convincing itself that wages aren’t going to become a problem,” TD Securities Toronto-based head of global commodity strategy Bart Melek said in a telephone interview. “There’s really not a big problem the US central bank needs to fix right now. The gold market is looking at this and saying there’s not a lot pressure to restrict policy at this point.”
Gold futures for April delivery added 0.1 percent to settle at US$1,220.80 per ounce at 1:37pm on the Comex in New York. The metal climbed 2.5 percent this week, the biggest gain since June 10 last year.
Silver added US$0.05 to US$17.48 per ounce, while copper lost US$0.07, or 2.6 percent, to US$2.62 per pound.
Wholesale gasoline rose US$0.02 to US$1.55 per gallon, while heating oil picked up US$0.01 to US$1.67 per gallon.
Natural gas dropped US$0.12, or 3.9 percent, to US$3.06 per 1,000 cubic feet.
Additional reporting by AP
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