Oil Prices Up 9% on the Best Weekly Gain Since 2016

Oil prices

Two commodities, gold and oil, have been surging over the past few weeks as worries among investors continue to grow. While the yellow metal has surged due to potential rate cuts from the Federal Reserve, oil has shot up as tensions between Iran and the U.S. have reached new heights.

Oil futures ended the week on a positive note, rising up nearly 9 percent over the past few days and ending at the highest settlement so far in June. Gasoline, in particular, was the biggest winner among energy futures, spiking up 4 percent on Friday alone amid reports that a fire at a 150-year-old refinery in Philadelphia.

While it’s unclear whether there was any permanent damage to what is the largest facility on the U.S. Eastern Seaboard, gas shot up on the worries that the facility might be out of operation for a little while.

As for oil itself, oil prices for West Texas Intermediate crude increased by 0.66 percent, settling the day at $57.43 per barrel. Based on these prices, WTI ended at the highest price it’s seen since May 29th, rising 8.8 percent over the course of the week in what’s been the best weekly percentage increase since December 2016.

Meanwhile, the international benchmark Brent crude increased by 75 cents, or 1.2 percent, to $65.20 a barrel, ending the week at a slightly lower 5.1 percent gain.

Friday’s spike in oil prices was seen as mainly a continuation of Thursday’s surge, where Iran first shot down a U.S. military drone that was close to their airspace. Although U.S. airstrikes against the country were called off at the last minute on Thursday night as President Trump chose instead to levy new sanctions, tensions in the oil markets have never been higher.

“U.S.-Iran tensions narrowly avoided a major escalation overnight,” said Robbie Fraser, senior commodity analyst at Schneider Electric, in daily comments. “The strike was ultimately called off, but the quick reversal nonetheless highlights how close the two countries are to direct confrontation.” Other analysts have added that President Trump also is considering that starting a potential conflict so soon to a re-election is a bad idea, especially if oil prices skyrocket as a result. “The president seems to be bending over backwards these days not to add to geopolitical tensions that could send oil up 5%-6% in a day like this,” added Investing.com senior analyst Barani Krishnan. “With his re-election bid in, low oil and gas prices at the pump, seems to be Trump’s primary concern. That’s why he’s even suggested being open to making peace with Tehran, despite the continued noises against Iran by some in his administration.”

Elsewhere, OPEC and its allies will be holding a meeting in early July, which was originally scheduled for this week, to discuss next steps in their output policy.

Prior to these tensions, it was widely agreed that OPEC would likely cut production further to offset America’s growing domestic output and prevent oil price from collapsing. With recent events, however, it’s possible that OPEC might postpone cutting supplies further until a resolution to the Iran-U.S. situation arrives.