Oil prices return higher on Middle East tensions

Global oil prices rose in European trade on Friday, resuming their advance and approaching six-month highs amid mounting Middle East tensions as Iran vows to respond to a presumed Israeli airstrike on its consulate in Syria.

The tensions overshadowed the dollar’s rise and the large US inventory buildup last week.

Prices

US crude rose 1% to $86.41 a barrel, with a session-low at $85.43, while Brent rose 0.95% to $90.92 a barrel, with a session-low at $90.06. 

US crude lost 0.8% on Thursday while Brent shed 0.5%, the fourth loss in five days on profit-taking off six-month highs.

 Israel-Iran Tensions 

The Wall Street Journal said that Israel is preparing for an Iranian attack in the next two days after its presumed air strike on the Iranian consulate in Syria. 

The Israeli government warned that if Iran attacked Israel, the Israeli army would respond with an attack on Iranian territory. 

Iran’s supreme leader Khamenei threatened to punish Israel, after accusing it of striking the Iranian consulate in Syria last week, killing 7 military officials. 

The mounting Israel-Iran tensions threaten a potential widening of the war between the two sides in the region, which could threaten supplies. 

The Dollar

 The dollar index rose 0.65% on Friday on track for the fifth straight session, scaling a five-month high at 105.95 against a basket of major rivals. 

Recent US inflation data hurt the odds of a Fed interest rate cut in June, in turn boosting the greenback.

US Stocks 

The Energy Information Administration reported a sharp increase of 5.8 million barrels in US crude stocks in the week ending April 5, the third such weekly increase in a row, beating estimates of a 0.9 million buildup.

According to the EIA, total commercial stocks rose to 457.5 million barrels, the highest since July 2023, in a negative sign for demand in the US. 

US Production

US crude production stayed flat last week at 13.1 million barrels, the lowest since the week ending December 8. 

Oil Prices Outlook 

Goldman Sachs’ analysts expect Brent to remain below $100 a barrel, provided no new surprising geopolitical hits take place.