Crude oil prices were on track to book their second weekly gain in a row, driven higher by geopolitics and supply concerns.

Early on Friday morning, Brent was trading above $91 per barrel and West Texas Intermediate was closing in on $87 per barrel. The rally came amid reports that Russia may have temporarily lost as much as 15% of its refining capacity because of Ukrainian drone attacks and Iran vowed to exact revenge on Israel for the strike of its consulate in Damascus.

“Oil prices look set for further upside in the short term as a more positive economic backdrop is joined by ongoing supply tightness and rising geopolitical risks,” analysts from ANZ said, as quoted by Reuters, revising their three-month price forecast for Brent crude to $95 per barrel.

The wider Mideast tensions stemming from the Gaza war are probably at the highest in months,” Vandana Hari, founder of Vanda Insights, told Bloomberg. “Crude is reflecting that Mideast conflagration fear premium.”

The latest from the Middle East is the news that the UAE is growing cold to Israel after several years of normalized relations. The reason for the change in attitude was the Israeli strike that killed seven aid workers in Gaza. Some reports said the Emirates were “outraged” with the event.

Demand for oil, meanwhile, remains quite healthy, with the latest U.S. weekly inventory report revealing declines in both gasoline and middle distillate stocks. This demand is set to rise further, especially in middle distillates as the manufacturing industry in the country gathers momentum, Reuters’ market analyst John Kemp wrote in a recent column.

While this is happening, OPEC+ reaffirmed its commitment to production limits at its latest meeting earlier this week. Even though there were overproducers again, prices rose after the meeting because the group signaled it was about to get those overproducers in line, demanding compensation for their excess production.

By Irina Slav for Oilprice.com

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