Oil on Friday rocketed to its biggest weekly gain in more than two years as US President Donald Trump’s aborted airstrikes against Iran left Middle East tensions simmering with the endgame uncertain.
Crude futures rose in New York to complete a 9.4 percent rally for the week.
Trump said on Twitter that he called off raids because of concern the death toll would not have been “proportionate” to Iran’s downing of a US spy drone earlier this week.
Trump said that he was in “no hurry” to respond, despite a series of provocations in the oil-rich region.
The canceled attack sent a “very confusing” message, Daniel Yergin, an oil historian and vice chairman at IHS Markit Ltd, said in a Bloomberg TV interview.
“The fear is that this could pretty quickly escalate. There’s plenty of room for accident, misunderstanding, future incidents. The Iranians are in a corner,” Yergin said.
West Texas Intermediate for August delivery on Friday closed up US$0.36 at US$57.43 per barrel on the New York Mercantile Exchange. The US benchmark notched its biggest weekly increase since December 2016.
Brent for August settlement rose US$0.75 to US$65.20 on London’s ICE Futures Europe Exchange.
Meanwhile, gasoline futures jumped 3.9 percent to US$1.86 per gallon as a fire raged at the biggest refinery on the US east coast.
Hostilities have been mounting in the Persian Gulf region, source of one-third of the world’s oil, with the drone incident, missile strikes on Saudi Arabia and an attack on tankers near the Strait of Hormuz.
On Thursday, a rocket exploded near an Exxon Mobil Corp workers’ camp in Iraq.
A US attack on Iranian targets, which would have included airstrikes, was close to being carried out when it was halted, said a US administration official who was granted anonymity to discuss a national security matter.
The official would not discuss whether the plan might be revived.
Despite crude’s recent rally, a prolonged US-China trade war has dented the demand outlook. Washington and Beijing are set to resume talks next week, providing a glimmer of hope for the global economy.
However, investors want a resolution to the dispute, not merely more talks, Yergin said.
“The market is poised between where it was before, which was just gloom,” and “the possibility that demand will spike up because there will be some kind of settlement with China,” Yergin said. “If there isn’t, there will be real disappointment and that will certainly show up in the oil price.”
Meanwhile, near-record US crude production has also been weighing on prices.
In other commodities trading, heating oil climbed 1.7 percent to US$1.92 per gallon and natural gas was little changed at US$2.19 per 1,000 cubic feet.
Gold edged up 0.2 percent to US$1,400.10 per ounce and silver fell 1.3 percent to US$15.29 per ounce, while copper fell 0.3 percent to US$2.70 per pound.
Additional reporting by AP
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