SINGAPORE: Oil prices were heading for their biggest monthly rise in years on Friday, amid rising tensions in the Middle East over a possible US attack on Iran that could disrupt supplies from one of OPEC’s biggest producers.
Brent crude oil futures rose 3.4% on Thursday to close at their highest since July 31, before falling 21 cents to $70.50 a barrel by 12:139 p.m. Japan time. The March contract expires later Friday. The more active April contract fell 37 cents to $69.22.
U.S. West Texas Intermediate crude oil fell 39 cents to $65.03 a barrel, after rising 3.4% in the previous session to settle at its highest since Sept. 26.
Both benchmarks are on track to post their first monthly gains in six months, with Brent up more than 16%, its biggest monthly gain since January 2022. WTI rose more than 14% in January, on track for its biggest monthly gain since July 2023.
Tensions are rising in the Middle East due to the US military buildup. US President Donald Trump on Wednesday urged Iran to come to the table and strike a deal on its nuclear weapons or face a US attack, drawing a threat of a violent response from Tehran.
“As a result, there is a risk premium built into (oil) prices as traders consider the potential for disruption to Iranian exports and Strait of Hormuz flows,” IG market analyst Tony Sycamore said in a note.
The Trump administration is hosting senior defense and intelligence officials from Israel and Saudi Arabia for separate talks on Iran in Washington this week, according to two people familiar with the matter. U.S. officials said President Trump is considering his options but has not decided whether to attack Iran.
“Given high inflation and this year’s midterm elections, we do not expect oil supply disruptions to be prolonged,” JPMorgan analysts led by Natasha Kaneva said in a note.
“If military action were to occur, it is expected that Iran’s oil production and export infrastructure would be avoided and targeted.”
Citi expects the United States and Israel to take restraining action against Iran in the short term, including limited U.S. action and the seizure of oil tankers, giving it a 70% chance.
JPMorgan analysts said disruptions in Kazakhstan, Russia and Venezuela affected supplies by a total of 1.5 million barrels per day in January, adding that the U.S. Arctic wave is estimated to reduce crude oil and condensate production by 340,000 barrels per day this month.
Kazakhstan said on Wednesday it would restart its giant Tengiz oil field in stages, aiming to reach full production within a week, after three unexplained electrical fires earlier this month affected 7.2 million barrels of oil production.
Bad weather has hit Russia’s oil exports, while Venezuela was forced to cut production after the US military ousted South American President Nicolas Maduro earlier this month.
The country’s caretaker government approved sweeping reforms to key oil laws on Thursday. The Trump administration also broadly eased sanctions on Venezuela’s oil industry on Thursday, both of which could increase Venezuela’s oil and gas production and spur investment. (Reporting by Florence Tan; Editing by Christian Schmollinger)
