WTI crude oil futures climbed above $74 per barrel on Friday, reaching a four-week high and set to record the largest weekly gain since March 2023. This surge is primarily driven by escalating tensions in the Middle East, sparking fears of potential oil supply disruptions.

Middle East Tensions and Supply Concerns

The growing conflict in the Middle East has raised concerns over oil supply stability. President Biden’s stance, avoiding condemnation of potential Israeli strikes on Iran’s oil facilities, has heightened market anxiety. Israel also pledged retaliation against Iran and increased its activity in Beirut, further stoking fears of potential disruptions in the region’s oil supply.

OPEC’s Spare Capacity and Global Supply Stability

Despite these geopolitical concerns, market fears have been somewhat alleviated by OPEC’s spare capacity and stable global oil supplies. OPEC’s ability to ramp up production, if necessary, has tempered the potential for severe supply shortages. Additionally, the resumption of Libya’s oil production has contributed to maintaining overall supply stability.

Strong US Economy Boosts Demand Optimism

On the demand side, optimism has been fueled by signs of a robust US economy. Positive labor market data and stronger-than-expected economic performance have bolstered confidence in continued demand for crude oil, further supporting the price increase.

Conclusion

WTI crude oil is on track for its largest weekly gain in months, driven by geopolitical tensions and supply concerns in the Middle East. However, OPEC’s spare capacity and the resumption of Libya’s oil production are helping to stabilize global supplies. On the demand front, a strong US economy is adding to the positive outlook for crude oil prices in the near term.