Investing.com - Oil was headed for its biggest weekly rise since June on Friday although gains on the day were modest as traders pared bullish bets ahead of the weekend and uncertainty over the United States’ next move on Iran after the Saudi attack.
Both U.S. West Texas Intermediate crude and the U.K. Brent benchmarks were up nearly 7% on the week amid worries that production by top oil exporter Saudi Arabia may not be as stable as stated by Riyadh after the Sept 14 attack on its oil infrastructure.
By 1:10 PM ET (17:10 GMT), WTI was up 18 cents, or 0.3%, at $58.37 per barrel.U.K. Brent crude rose 36 cents, or 1%, to $65.06.
For the week, WTI was headed for a gain of 6.5% and Brent nearly 7%. It was a wild week in oil, with prices surging as much 19% on Monday, right after the attack, and tumbling about 6% the following session as traders tried to gauge the impact on global oil supply. Friday’s gains were relatively modest as traders awaited the outcome of a high-level meeting by the Trump administration on the Saudi attack and how to deal with Iran.
Washington suspects Iran as the perpetrator for the Sept 14 attack which initially disrupted 5.7 million barrels per day of Saudi production -- or 5% of world global output. Yemen-based Houthi rebels, however, have claimed responsibility for the attack and Tehran any role in it.
The New York Times reported that Defense Secretary Mark Esper and Chairman of the Joint Chiefs of Staff General Joseph Dunford would meet with President Donald Trump later Friday to present possible options for military retaliation.
So far, the U.S. has blamed Iran directly for the attacks, but Trump’s only concrete reaction has been to impose further sanctions on the country, a move largely dismissed as symbolic given that existing U.S. sanctions on the country are already strangling its trade and capital flows.
Saudi state oil company Aramco repeated its assurances Friday that it will have 11 million barrels a day of capacity back online by the end of the month, well above its current actual output level.
Much is riding on the kingdom's ability to recover from the initial attack and protect itself from future ones.
"A sustained oil price increase of $10 - $20 per barrel could cut global growth by 0.1–0.2 percentage point," said IHS Markit chief economist Nariman Behravesh in a research note.
"While the damage of an oil shock to the US economy will be much less than in the past, the harm to large net oil-importing economies such as China, Japan, and Europe could be significant."
U.S. prices may also come under some pressure in the short term after heavy rainfall in the Houston area hit refinery activity. Exxon Mobil (NYSE:XOM) closed its 370,000 b/d Beaumont refinery on Thursday due to flooding. However, the floods have been nowhere near as severe as Hurricane Harvey two years ago, which knocked 4 million barrels a day of refining capacity offline.