May 11 (UPI) — Crude oil prices were stuck in something of a holding pattern on Friday as the needle for geopolitical risk spins with no clear direction.
Crude oil prices have been elevated for much of the year on the back of heightened geopolitical risk, from a Saudi-Iran proxy war in Yemen to multilateral skirmishes in the Syrian civil war. That risk was most pronounced on Tuesday when U.S. President Donald Trump pulled out of the multilateral Iranian nuclear agreement.
After slumping before the announcement, crude oil prices jumped more than 3 percent on Wednesday, but have since been in a relative holding pattern. Ole Hansen, the head of commodity strategy at Danish investment firm Saxo Bank, said in response to questions sent by UPI that Brent crude oil may be moving in the range of $71 to $82 per barrel.
“Without a further escalation between Israel and Iran one would assume that the market may struggle to make further gains in the short term,” he said. “Selling into a live geopolitical situation requires quite a bit of nerve and has yet to emerge.”
Israeli forces on Thursday hit Iran’s military structure in Syria, including a logistics headquarters belonging to Iran’s Quds Force near Damascus International Airport. Iran’s government responded Friday that it would back Syria’s “right to defend itself.”
The price for Brent crude oil, the global benchmark, was down 0.25 percent as of 9:16 a.m. EDT to $77.28 per barrel. West Texas Intermediate, the U.S. benchmark, was down 0.2 percent to $71.22 per barrel.
Apart from a geopolitical risk premium, the price of crude oil was supported this week by drains in U.S. inventory levels as reported by the U.S. Energy Information Administration. A mid-week assessment from Geoffrey Craig, the oil futures editor at S&P Global Platts, said markets could be ready for a sell-off after the Trump-triggered peak for the week unless the gap between supply and demand is shrinking.
“Recent EIA data has been price supportive,” he said.
The price for oil may move later in the day when Baker Hughes issues its weekly rig count figures. A possible indication of future production trends, a gain, particularly in the United States, could send the price for oil lower.
Texas regulators reported that rig activity in the state is up 30 percent from last year.