Investing.com — Oil prices rose on Friday, on track for strong weekly gains on concerns that conflict in the Middle East could disrupt crude flows from this key export region.
At 09:20 ET (1320 GMT), futures were trading 0.8% higher at $78.24 per barrel and the Brent contract was up 0.8% at $74.35 per barrel.
futures are expected to rise about 8% this week – the steepest since February 2023, while the 7.5% weekly rise in US crude futures would be the biggest since March last year.
Raw profits on the risk premium for the Middle East
A risk premium has been added to the crude oil market as traders await Israel’s response to Iran firing more than 180 missiles into its territory, given the potential of a response to Iran’s oil infrastructure, cutting off supplies from oil-rich region may be disrupted.
The US is discussing whether it would support Israeli attacks on Iranian oil facilities in retaliation for Tehran’s missile attack on Israel, President Joe Biden said on Thursday.
Oil prices could rise by $20 a barrel if Iranian production takes a hit, according to Goldman Sachs.
It is estimated that “if you saw a sustained decline of 1 million barrels per day in Iranian production, you would see a peak increase in oil prices of around $20 per barrel next year,” said Daan Struyven, co-head of Goldman Sachs. of global commodities research, CNBC told Squawk Box Asia on Friday.
While OPEC has plenty of spare capacity to compensate for the loss of Iranian supplies, much of that capacity is in the Middle East’s Gulf region and is potentially vulnerable if the conflict escalates further, said Giovanni Staunovo, an analyst at UBS.
Nonfarm payrolls are impressive
The crude oil market also got a boost on Friday after data showed US employment growth in September was much stronger than expected, with 254,000 jobs added last month, up from an upwardly revised figure of 159,000 in August.
Meanwhile, growth slowed to 4.1%. The figure matched August’s pace of 4.2%, according to forecasts.
While this huge jobs report reduces the chances of another aggressive Fed rate cut, Chairman Jerome Powell had already indicated earlier this week that the central bank would likely opt for more traditional quarter-point cuts in the future.
Furthermore, it could be suggested that this strong labor market could point to a soft landing for the US economy, meaning energy demand would remain fairly strong.
