Oil prices rose on Friday and settled with their biggest weekly gains in over a year on the threat of a wider war in the Middle East following Israel and Iran’s conflict.
Brent crude oil, against which Nigerian crude oil is priced, rose 43 cents (0.6%) to settle at $78.05 per barrel while the US West Texas Intermediate 9WTI) crude oil gained 67 cents (0.9%) to close at $74.38 per barrel.
Israel has vowed to strike Iran for launching a barrage of missiles at Israel on Tuesday after Israel assassinated the leader of Iran-backed Hezbollah a week ago.
Meanwhile, gains were limited as US President Joe Biden discouraged Israel from targeting Iranian oil facilities.
The development has oil analysts warning clients of the potential ramifications of a broader war in the Middle East.
Iranian oil tankers have started moving away from Kharg Island, Iran’s biggest oil export terminal, amid fears of an imminent attack by Israel on the most important crude export infrastructure in Iran.
Market analysts say that the OPEC spare capacity, concentrated in Saudi Arabia and the United Arab Emirates (UAE), would compensate for an Iranian loss of supply.
They noted that an even more significant disruption to supply from the Middle East could lead to triple-digit oil prices, but nothing suggests that attacks on oil infrastructure in other producers in the region or the closure of the Strait of Hormuz are low-probability events.
JPMorgan commodities analysts wrote that an attack on Iranian energy facilities would not be Israel’s preferred course of action.
However, low levels of global oil inventories suggest that prices are set to be elevated until the conflict is resolved, they added.
Iran is a member of the Organisation of the Petroleum Exporting Countries and its allies, OPEC+ with production of around 3.2 million barrels per day or 3 per cent of global output.
On Friday, Iran’s Supreme Leader Ayatollah Ali Khamenei appeared in public for the first time since his country launched the missile attack and said the country will not relent.
Supply fears have also eased in Libya as the country’s eastern-based government lifted the force majeure on output and exports just hours after a deal was reached for two compromise candidates to head the country’s central bank, which controls the country’s oil revenues.