Key Takeaways
- Oil prices fell on Friday but are expected to gain more than 6 percent for the week.
- US diesel prices hit record highs due to renewed US-Iran hostilities and Ukrainian attacks.
- Analysts warn of potential economic hard landing due to rising fuel prices and inflation.
Oil prices dipped on Friday, with Brent crude futures down 23 cents or 0.24 percent to USD 95.29 a barrel by 10:38 a.m. CDT (1538 GMT), and West Texas Intermediate crude futures down 54 cents, or 0.59 percent, to USD 90.76.
Despite the short-term decline, oil prices are on course to gain more than 6 percent for the week, driven by renewed US-Iran hostilities and Ukrainian attacks on Russian refineries, which have increased supply disruptions.
US diesel prices reached record highs, a development that has pushed inflation and government borrowing costs higher around the world, according to Claudio Galimberti, chief economist at Rystad Energy.
The conflict between the United States and Iran has intensified, with US attacks this week that killed and wounded dozens, including Iranian civilians, being the fiercest clashes since July.
Israel's Defence Minister, Israel Katz, renewed warnings that Israel would 'cripple' Iran's military and civilian infrastructure, including energy facilities, if Tehran attacked it.
Analysts at Julius Baer noted that oil prices seem to be in a phase where the conflict's gridlock and recurring hostilities are regularly awakening a risk premium embedded in prices.
The US government has stated that Middle Eastern oil flows have returned to near normal levels in recent weeks, but analysts and tanker trackers indicate that flows remain seriously disrupted.
Four commodity vessels transited the Strait of Hormuz on Thursday, well below the 10-day average tally of about 15, according to preliminary shipping data.
Iraq increased its August oil exports to about 2.34 million barrels per day from about 1.35 million bpd in July, according to two Iraqi energy officials.
Financial institutions, such as Citi, have raised their average Brent crude price forecast for the third quarter to USD 86 a barrel from USD 80, citing the reopening of the strait taking longer than expected.
Oil seems to be in a phase where the conflict's gridlock and recurring hostilities are regularly awakening a risk premium embedded in prices.
Norbert Rucker, Head of economics and next generation research at Julius Baer
