Oil prices rose for a fourth consecutive session on Friday as investors braced for a potential Israeli strike on Iranian energy infrastructure, setting up crude benchmarks for their biggest weekly gains since OPEC+ began curtailing output two years ago.
Brent crude futures rose by $1.04, or 1.3%, to $78.66 per barrel by 12:36 p.m. ET, while U.S. West Texas Intermediate futures gained $1.19, or 1.6%, to $74.90 per barrel.
On a weekly basis, both benchmarks were set to gain more than 9% - the most in a single week since the Organization of the Petroleum Exporting Countries and allies (OPEC+) agreed to steep oil production cuts in October 2022.
Both contracts rose more than 5% on Thursday after U.S. President Joe Biden acknowledged that the White House was in talks with Israel about whether or not it will support a strike on Iranian oil facilities. "We're discussing that," Biden said on Thursday, sending oil futures surging immediately.
Oil analysts have since rushed to alert clients about the potential ramifications from a widening war in the Middle East.
Israel said on Friday it had targeted Iranian proxy Hezbollah's intelligence headquarters in Lebanon overnight and was assessing the damage, while Iran's Supreme Leader called on allies to step up their anti-Israel struggle.
An attack on Iranian energy facilities would not be Israel's preferred course of action, JPMorgan commodities analysts wrote on Friday. Still, low levels of global oil inventories suggest that prices are set to be elevated until the conflict is resolved, they added.
Citing data from ship-tracking service Kpler, they said that inventories are below last year's levels when Brent was trading at $92 and at 4.4 billion barrels are the lowest on record.
Brokerage StoneX forecasts oil prices could jump between $3 and $5 per barrel if Iranian oil infrastructure is targeted.
On Friday, Iran's Supreme Leader Ayatollah Ali Khamenei appeared in public for the first time since his country launched a missile attack on Israel, calling for more anti-Israel struggle.
Iran will target Israeli energy and gas installations if Israel attacks it, the semi-official Iranian news agency SNN quoted Revolutionary Guards deputy commander Ali Fadavi as saying on Friday.
Iran is a member of OPEC+ with production of around 3.2 million barrels per day or 3% of global output.
The group's spare production capacity should allow other members to boost output if Iranian supplies are disrupted, limiting oil's gains, Rystad analysts said on Thursday.
Supply fears have also eased in Libya. The country's eastern-based government and Tripoli-based National Oil Corp on Thursday said all oilfields and export terminals were being reopened after a dispute over leadership of the central bank was resolved.
This should allow the country to more than double its production levels, restoring them to about 1.2 million bpd, StoneX noted.
(Reuters - Reporting by Shariq Khan, Ahmad Ghaddar and Arunima Kumar; Additional reporting by Gabrielle Ng; Editing by Kirsten Donovan)