Oil heads for weekly gain of more than 7% after Saudi attacks
NEW YORK (Reuters) – Oil prices rose about 1% on Friday, with Brent set for its biggest weekly gain since January, lifted by rising Middle East tensions and supply concerns after an attack on Saudi Arabia’s energy industry last weekend.
Brent crude LCOc1 futures rose 45 cents, or 0.7%, to $64.85 a barrel by 11:32 a.m. EDT (1532 GMT). U.S. West Texas Intermediate (WTI) crude CLc1 futures gained 67 cents, or 1.2%, to $58.80 a barrel.
For the week, Brent was set to rise 7.7%, its biggest gain since January, while WTI was on track for a 7.2% increase, the most since June.
The oil market jumped nearly 20% on Monday in reaction to the Sept. 14 attack, which halved Saudi production and cut global supplies by about 5%. But prices have since pared most of those gains on assurances from the kingdom that it would restore lost production by the end of this month.
Prices, however, have kept a risk premium as geopolitical tensions in the region have escalated with the United States and Saudi Arabia blaming the attack on Iran. Tehran denies any involvement.
The attack has intensified a years-long struggle between Saudi Arabia and Iran, who are locked in a sometimes violent contest for influence in several flashpoints around the Middle East.
A Saudi-led coalition on Friday launched a military operation north of Yemen’s port city of Hodeidah while the United States worked with Middle East and European nations to build a coalition to deter Iranian threats.
State-owned Saudi Aramco has switched crude grades and delayed crude and oil product deliveries to customers by days after the attack severely reduced its light oil production and led to output cuts at its refineries, market sources said.
Whilst showing reporters the damaged the Khurais field and the Abqaiq oil processing facility, Aramco said it was shipping equipment from the United States and Europe to rebuild the damaged facilities. It also said that Abqaiq is expected to have full capacity restored by the end of the month.
“The question is can they convince the market that they can keep their oil fields safe,” said Phil Flynn, an analyst at Price Futures Group in Chicago, in a note.
In the United States, meanwhile, flooding from Tropical Storm Imelda forced a major refinery to cut production, while a key oil pipeline, terminals and a ship channel in Texas were shut, according to sources familiar with operations. [nL2N26B0IN]
“Going into the weekend there will be a lot of short-covering, which will support prices,” said Olivier Jakob of consultant Petromatrix.
Addiitonal reporting by Julia Payne in London and Florence Tan in Singapore; Editing by Marguerita Choy and David Goodman