Oil Prices Surge Over $1 Per Barrel Amid Supply Risks

HOUSTON (Reuters) – The Brent and U.S. West Texas Intermediate crude oil benchmarks surged by more than $1 a barrel during trading on Friday as markets monitored the possibility of direct conflict between Israel and Iran, which could further constrain supplies.

Brent crude settled at $91.17 a barrel, rising by 52 cents, or 0.57%. U.S. West Texas Intermediate crude closed at $86.91 a barrel, up by 32 cents, or 0.37%. Both benchmarks reached their highest levels since October in Thursday’s settlement.

Brent and WTI are poised to record gains of over 4% this week following Iran’s pledge of retaliation against Israel for an attack that resulted in the death of senior Iranian military personnel. “If Iran directly attacks Israel, that’s never happened before,” remarked Phil Flynn, an analyst at Price Futures Group. “It’s just another geopolitical risk domino about to fall.” Israel has not taken responsibility for the attack on Iran’s embassy compound in Syria on Monday.

According to a NATO official, ongoing Ukrainian drone strikes on refineries in Russia may have disrupted more than 15% of Russian capacity, affecting the country’s fuel production.

The Organization of the Petroleum Exporting Countries (OPEC) and its allies, led by Russia, collectively known as OPEC+, maintained their oil supply policy unchanged this week and urged certain countries to improve compliance with output cuts. “Further clampdowns on adherence to quotas should see output fall further in Q2,” noted ANZ analysts Daniel Hynes and Soni Kumari. “The prospect of a tighter market should see a drawdown in inventories during the second quarter.”

In other economic news, U.S. job growth surged in March, surpassing expectations, and wages also saw a steady increase, according to official data released on Friday. The addition of 303,000 jobs last month suggests robust oil demand but may potentially postpone anticipated interest rate cuts by the U.S. Federal Reserve later this year.

JPMorgan analysts wrote in a note that global oil demand is projected to grow by 1.4 million barrels per day (bpd) in the first quarter.

Meanwhile, U.S. energy firms reduced the number of oil and natural gas rigs operating for the third consecutive week, marking the first such decline since October, as reported by energy services firm Baker Hughes in its closely followed report on Friday. The oil and gas rig count dropped by one to 620 in the week ending April 5, reaching its lowest level since early February.