Oil prices settle up slightly on Iran worries, but prices down for week

OIL prices edged up on Friday (Nov 1) on reports Iran was preparing a retaliatory strike on Israel from Iraq in the coming days, but record US output weighed on prices.

Brent futures were up 29 US cents, or 0.4 per cent, to settle at US$73.10 a barrel. US West Texas Intermediate (WTI) crude gained 23 US cents, or 0.3 per cent, to settle at US$69.49. At their session highs, both benchmarks were up over US$2 a barrel.

Brent posted a weekly decline of about 4 per cent with WTI down about 3 per cent.

On Thursday, US news website Axios reported that Israeli intelligence suggests that Iran is preparing to attack Israel from Iraq within days, citing two unidentified Israeli sources.

“Any additional responses from Iran might remain restrained, similar to Israel’s limited strike last weekend, hence primarily intended as a demonstration of strength rather than an invitation to open warfare,” said SEB Research analyst Ole Hvalbye.

Iran and Israel have engaged in a series of tit-for-tat strikes within the broader Middle East warfare set off by fighting in Gaza. Previous Iranian air attacks on Israel on Oct 1 and in April were mostly repelled, with only minor damage.

Iran is a member of the Organization of the Petroleum Exporting Countries (Opec) and produced about four million barrels per day (bpd) of oil in 2023, US Energy Information Administration (EIA) data showed.

Iran was on track to export around 1.5 million bpd in 2024, up from an estimated 1.4 million bpd in 2023, according to analysts and US government reports.

Iran backs several groups that are currently fighting Israel, including Hezbollah in Lebanon, Hamas in Gaza and the Houthis in Yemen.

A US official asked Lebanon to declare a unilateral ceasefire with Israel to revive stalled talks to end Israeli-Hezbollah hostilities, a senior Lebanese political source and a senior diplomat said – a claim denied by both sides.

Oil prices were also supported by expectations Opec+ could delay December’s planned increase to oil production by a month or more on concern over soft oil demand and rising supply. A decision could be made as early as next week.

Opec+ includes Opec and its allies such as Russia and Kazakhstan.

As Opec+ holds back on production, US oil major ExxonMobil said its global output hit an all-time high, while Chevron said its US production hit a record high.

The US Energy Information Administration said this week that drillers pulled a record 13.5 million barrels per day (bpd) of oil out of the ground. EIA also said this week that output in August hit a record 13.4 million bpd, and has said that annual output was on track to hit a record 13.2 million bpd in 2024 and 13.5 million bpd in 2025.

US job growth almost stalled in October as labour strikes in the aerospace industry depressed manufacturing employment while hurricanes impacted the response rate for the payrolls survey, making it hard to get a clear picture of the labour market ahead of next week’s presidential election.

Polls show the US presidential race is a toss-up between Democratic Vice-President Kamala Harris or Republican former president Donald Trump as the country’s next president.

Economists said they expect the US Federal Reserve to cut interest rates by 25 basis points next Thursday.

After hiking rates aggressively in 2022 and 2023 to tame a surge in inflation, the Fed started to lower rates in September.

Lower rates decrease borrowing costs, which can boost economic growth and demand for oil. REUTERS