Oil prices eased slightly on Friday after surging to more than $108 per barrel in the previous session, as investors weighed the possibility of a truce between the US and Iran against the bombings of Saudi Arabia by Houthi rebels that renewed fears of supply disruptions from Opec's biggest producer.
Brent, the benchmark for two-thirds of the world's oil, was down 1.2 per cent to $105.3 a barrel at 10am UAE time. West Texas Intermediate, the gauge that tracks US crude, was trading 2 per cent lower at $92.72 a barrel.
“Brent crude rose sharply on Thursday after Saudi Arabia said it had intercepted missiles launched by Houthi militia, and an Iranian military adviser threatened to widen the conflict to the Indian Ocean,” Jeanne Walters, senior economist at Emirates NBD, said in a research note.
“Prices reached an intraday high of just over $108 per barrel before reports that US and Iranian negotiators were exploring a phased deal to reopen the Strait of Hormuz moderated the rally.”
Brent closed at $106.6 per barrel on Thursday after nearing the $108 a barrel mark and fell further on Friday following reports of Iran peace talks progressing to end the months-long conflict.
Brent is on track to post a weekly gain of about 2 per cent, while WTI is down about 7 per cent for the week, with a potential US ban on diesel exports that could flood the domestic market weighing on the trajectory of US crude prices.
The spread between Brent and WTI is the widest it has been since May, at $12.68, when it was over $13, according to Reuters.
Oil prices remained volatile this week amid Iran peace talks in New York to end the conflict, as well as based on reports of reopening Saudi's East-West pipeline, which has been pumping about 4 million barrels of Saudi crude on a daily basis to transport to global markets from the kingdom’s Red Sea port of Yanbu.
The key pipeline that bypasses the Strait of Hormuz was shut following drone attacks on September 10.
Ship traffic
Meanwhile, ship traffic across the Strait of Hormuz and Bab Al Mandeb remains sparse amid Middle East tensions, with 13 crossings reported across Hormuz on Thursday and 27 in the Bab Al Mandeb strait, preliminary data from Kpler showed.
A large VLCC tanker exited the Hormuz carrying 2 million barrels of Saudi crude on Thursday. Three other VLCC tankers also exited the strait, each carrying two million barrels of crude.
Gold prices
Gold prices eased on Friday and were set to post a weekly loss on the back of a stronger dollar and growing expectations that the Federal Reserve will keep interest rates elevated to contain inflation.
Spot gold fell 0.09 per cent to $4,271.01 per ounce at 9.56am UAE time.
US President Donald Trump’s latest US-China comments on reducing trade friction are also changing the geopolitical component of the gold-price outlook, said Naeem Aslam, chief investment officer at Zaye Capital Markets.
Mr Trump’s description of the relationship with Chinese President Xi as a “truly great friendship”, confirmation that recent economic and trade consultations “achieved new outcomes”, and support for continued dialogue point towards “reduced immediate trade confrontation”, Mr Aslam said.
The extension of the US-China trade truce from November 10 to January 10 is also reducing part of the safe-haven premium that the elevated trade uncertainty can generate for gold, he added.
