Oil extended gains for a second day on Friday after attacks by Iran led to a reduction in Saudi Arabia’s production capacity, but prices are heading towards a weekly loss following the announcement of a two-week ceasefire between the US and Tehran.
Brent, the benchmark for two thirds of the world’s oil, was trading 1.86 per cent higher at $97.70 a barrel at 11.21am UAE time on Friday. West Texas Intermediate, the gauge for US oil, was up 2.02 per cent at $99.85 a barrel.
Oil is on track to post a 11 per cent weekly loss, the biggest decline since June 2025, when previous Israeli-US strikes on Iran were halted.
Prices plunged as much as 17 per cent on Wednesday as the US and Iran agreed to a fragile ceasefire. Talks are planned in Islamabad on Saturday.
Crude rose “as strikes on Saudi oilfields and the East-West Pipeline reduce crude output and throughput and Hormuz traffic remains near standstill”, said Vandana Hari, chief executive of Singapore-based Vanda Insights.
Saudi Arabia’s production capacity was reduced by about 600,000 barrels per day following attacks on its energy sites, state-run news agency SPA quoted an Energy Ministry official as saying on Thursday.
Last week's attack on the East-West crude pipeline, connecting Abqaiq in the East to Yanbu on the Red Sea, also led to a loss of about 700,000 bpd in the amount delivered through the pipeline.
A ministry official there had been repeated attacks on oil and gas production, transport, refineries, petrochemical plants and the electricity sector in Riyadh, the Eastern Province and Yanbu Industrial City. It did not say who launched the attacks.
There are also doubts about whether the ceasefire will hold as Israel has continued to launch deadly attacks on Lebanon.
Meanwhile, passage through the Strait of Hormuz, which was meant to reopen under the ceasefire, remains restricted.
US President Donald Trump said in a post on Truth Social that oil would soon begin moving through the waterway “with or without” Tehran's co-operation.
“Iran is doing a very poor job, dishonourable some would say, of allowing oil to go through the Strait of Hormuz. That is not the agreement we have,” he said, referring to the ceasefire. "Very quickly, you’ll see oil start flowing, with or without the help of Iran – and, to me, it makes no difference."
He also warned Iran against imposing tolls on tankers during the negotiations, saying “they better not be – and, if they are, they better stop now".
The strait is crucial to markets because 20 per cent of global oil and gas supplies normally passes through it. Oil prices have been extremely volatile since the war began on February 28, with prices swinging an average of more than $9 a day, the largest daily moves in years, Bloomberg calculations show.
Peak disruption
However, Christian Gattiker, head of research at Julius Baer, believes peak disruption to global energy supply has probably passed.
"Even at the height of the conflict, flows through the Strait of Hormuz never fully stopped, with alternative routes and partial reopening mechanisms cushioning the shock," he said.
Saudi Arabia's East-West crude pipeline and the UAE's oil pipeline from Habshan in Abu Dhabi to Fujairah have prevented the Gulf supply chain from drying up completely.
"This reinforces the view of a short-lived but intense spike rather than a sustained energy crisis, suggesting that the worst of the oil shock may now be in the rear-view mirror," Mr Gattiker added.
