Brent crude tops $90 on Mideast fears, but IEA sees slower global oil demand growth

Crude oil futures settled higher Friday after touching their highest intraday levels in six months, in a roller-coaster session marked by concerns that an attack by Iran on Israel could come any time soon, which would expand the war in the Middle East and potentially affect oil supplies.

But prices pulled back from the highs of the day, winding up with losses for the full week in which U.S. crude stocks rose sharply and inflation came in hotter than expected.

“There seems to be a lot of option call buying as we go into the weekend, which is keeping upward pressure on futures prices,” BOK Financial’s Dennis Kissler said, according to Dow Jones, noting that Iran’s production is estimated at 3M bbl/day, and “if a large percentage of that were to move away or be delayed to the world market, the supply/demand picture could tighten further very quickly.”

“Nobody wants to be short heading into the weekend,” Manish Raj at Velandera Energy Partners said, adding that “Iran’s secret weapon is its ability to block the Strait of Hormuz.”

But OPIS global head of energy analysis Tom Kloza told MarketWatch that regarding the Strait of Hormuz, “it makes no sense whatsoever for Iran to do anything that compromises flows there or that could lead to restricted Iranian exports.”

Front-month Nymex crude (CL1:COM) for May delivery closed +0.7% on Friday to $85.66/bbl, after trading as high as $87.67 for the highest intraday level for a front-month contract since October, while front-month June Brent crude (CO1:COM) ended +0.8% on Friday to $90.45/bbl, after rising to an intraday high of $92.18, but the oil benchmarks finished lower for the week by 1.4% and 0.8%, respectively.

U.S. natural gas (NG1:COM) ended a quiet week, with the front-month May contract +0.3% on Friday but down 0.8% from a week ago at $1.770/MMBtu.

ETFs: (NYSEARCA:USO), (BNO), (UCO), (SCO), (USL), (DBO), (DRIP), (GUSH), (NRGU), (USOI), (UNG), (BOIL), (KOLD), (UNL), (FCG)

The heightened geopolitical risk going into the weekend outweighed any reaction to the International Energy Agency’s bearish monthly report, which reduced its estimate for 2024 oil demand growth to 1.2M bbl/day from its 1.3M bbl/day growth outlook issued a month ago.

The IEA also said the pace of growth is set to further slow down in 2025 to 1.1M bbl/day, as the post-COVID rebound runs its course and the electric vehicle rollout weighs on consumption.

OPEC left its much more optimistic forecast intact earlier this week, forecasting demand growth of 2.2M bbl/day this year and 1.8M bbl/day next year.

The energy sector, as indicated by the Energy Select Sector SPDR ETF (NYSEARCA:XLE), ended the week -2%.

Top 10 gainers in energy and natural resources in the past 5 days: Eco Wave Power (WAVE) +176.1%, Indonesia Energy (INDO) +63%, Global Gas (HGAS) +27.2%, Perpetua Resources (PPTA) +24.3%, Houston American Energy (HUSA) +24.3%, MP Materials (MP) +15.2%, NextDecade (NEXT) +12.5%, Marine Petroleum (MAPS) +11.6%, Verde Clean Fuels (VGAS) +11.2%, Warrior Met Coal (HCC) +10.7%.

Top 5 decliners in energy and natural resources in the past 5 days: FutureFuel (FF) -29.7%, Aemetis (AMTX) -17.8%, Battalion Oil (BATL) -16.7%, Nuscale Power (SMR) -13.6%, Par Pacific (PARR) -12.5%.

Source: Barchart.com