Middle East uncertainty drives up the price of oil
Oil rocketed to its biggest weekly gain in more than two years as U.S. President Donald Trump's aborted air strikes against Iran left Middle East tensions simmering with the endgame uncertain.West Texas oil could have a price advantage over Middle Eastern oil as the cost of shipping rates from the Middle East goes up because of Iranian attacks on tankers. The rate for a supertanker headed to China is now $26,000. One of the reasons the US has not responded more aggressively to Iran so far is that it is no longer dependent on the Middle East for its oil supply. Countries like China have a greater need for keeping the oil flowing.
Crude futures rose in New York on Friday to complete a 9.4% rally for the week. Trump tweeted that he called off raids because of concern the death toll wouldn't have been "proportionate" to Iran's downing of an American spy drone earlier this week. Trump said he was in "no hurry" to respond, despite a series of provocations in the oil-rich region.
The canceled attack sent a "very confusing" message, Daniel Yergin, an oil historian and vice-chairman at IHS Markit Ltd., said in a Bloomberg TV interview. "The fear is that this could pretty quickly escalate. There's plenty of room for accident, misunderstanding, future incidents. The Iranians are in a corner."
West Texas Intermediate for August delivery closed 36 cents higher onFriday at $57.43 a barrel on the New York Mercantile Exchange. The U.S. benchmark notched its biggest weekly increase since December 2016. Brent for August settlement rose 75 cents to $65.20 on London's ICE Futures Europe Exchange.
Gasoline futures, meanwhile, jumped 3.9% as a fire raged at the biggest refinery on the U.S. East Coast.
Hostilities have been mounting in the Persian Gulf region, source of one third of the world's oil, with the drone incident, missile strikes on Saudi Arabia and an attack on tankers near the Strait of Hormuz. On Thursday, a rocket exploded near an Exxon Mobil Corp. workers' camp in Iraq.