Oil prices steadied after rising early on Friday, following an escalation in attacks on Saudi Arabia by Yemen's Houthi rebels that renewed supply fears in the market.
Brent, the benchmark for two thirds of the world's oil, was down 0.68 per cent at $81.93 a barrel at 2.34pm UAE time. The price swung above and below the $80 mark for most of the week. West Texas Intermediate, the gauge that tracks US crude, was down 0.39 per cent to $76.99 per barrel.
The Houthis launched an attack on the southern region of the kingdom on Thursday, injuring 11 civilians. That followed attacks on a Saudi-linked ship in the Red Sea on Wednesday and the Najran airport on Tuesday. The Iran-backed group has also imposed a Red Sea "blockade" that has disrupted Saudi oil exports.
The Houthi escalation comes as the Iran war, which is nearing the six-month mark, continues to simmer. There were some signs this week that the US and Iran might reach a framework agreement about shipping in the Strait of Hormuz, causing oil prices to drop.
Brent and WTI are both on track for steep weekly losses. At last week's close, they had posted their biggest monthly gains since March.
"The week's net decline is a round trip – as the physical picture never eased," said Gareth Nicholson, chief investment officer of First Abu Dhabi Bank Asset Management. "Oil fell almost 12 per cent over three sessions pricing a Hormuz off-ramp – then Iran struck the strait's entrance overnight and demanded US and Israeli ships be barred, sending Brent back above $84.
"The optimism trade is unwinding because the physical picture never eased and Iranian hardliners can sabotage any deal the mediators reach."
The ripple effects of the war on global oil prices have made it difficult for governments, energy companies and analysts to project where the market is heading.
Sources told The National on Thursday that Iran was looking to exploit the situation in the strait by seeking sanctions relief in exchange for agreeing to toll-free passage. Before the war erupted, about a fifth of the world's oil and gas supplies flowed through the waterway.
On Sunday, the Opec+ group of oil producers agreed to increase crude output for a sixth consecutive month in September. They also pledged to continue to monitor developments.
