Oil was on course for a weekly gain of more than 5 per cent on Friday as the US and Iran continued to exchange fire in a conflict now in its seventh month.
Brent crude futures were down 1.66 per cent to $93.93 a barrel by 6.19 PM UAE time, while US West Texas Intermediate crude was down 2.1 per cent to $89.38. For the week, Brent was up 5 per cent and WTI 7 per cent, its strongest weekly performance since July 13.
The rally, alongside a far steeper climb in fuel prices, has pushed inflation and government borrowing costs higher worldwide, and sharpened warnings that the global economy is heading for a hard landing.
“Commodities are therefore caught between rising rates and rising inflation, but the pressures are far from uniform,” said Ole Hansen, head of commodity strategy at Saxo Bank.
“Energy and agriculture continue to benefit from scarcity and geopolitical disruption, industrial metals remain supported by tight supply, while gold and silver are temporarily paying the price for tighter monetary conditions and a stronger dollar.”
Average US diesel prices reached record highs, as renewed hostilities and Ukrainian attacks on Russian refineries compounded supply disruptions. European stockpiles of the fuel are well below seasonal levels.
US strikes this week killed and wounded dozens of people, including Iranian civilians, in the fiercest clashes since July. Iranian forces attacked vessels transiting the Strait of Hormuz and fired missiles at Jordan, Kuwait and Bahrain. Israeli Defence Minister Israel Katz warned that Israel would “cripple” Iran's military and civilian infrastructure, including energy facilities, should Tehran attack.
Four commodity vessels transited Hormuz on Thursday, well below the 10-day average of about 15, preliminary shipping data showed. Washington has said Middle Eastern flows have returned to near-normal levels, but analysts and tanker trackers say disruption remains severe. About a fifth of the world's oil and liquefied natural gas moved through the strait before the war.
Iraq lifted August exports to about 2.34 million barrels per day from about 1.35 million in July, two Iraqi energy officials said, while Saudi Arabia left the price of its flagship crude to Asia unchanged for next month, against expectations of an increase.
Citi raised its third-quarter Brent forecast to $86 a barrel from $80, saying the strait's reopening was taking longer than expected. ANZ lifted its short-term forecast to $95. Brent is up almost 60 per cent this year.
