Oil prices saw an upturn on Friday, flashing an upward trend of the week, after two weeks in a row of decline. The rally was driven by positive sentiment around economic growth amidst sustained shortage as many conflicts in the Middle East continue.
Price movement
The Brent crude futures gained 47 cents more to USD 89.48 a barrel and the WTI crude futures also rose 44 cents more to USD 84.01 a barrel, reflecting a 0.5% growth for both.
Weekly performance
Brent and WTI have been in sight during this week as the former has gained 2.4% and the latter with a smaller increase of 0.9% suggesting an upward direction in oil prices.
Optimistic economic outlook
US Treasure Secretary Janet Yellen’s comments on the GDP growth that might be revised to a higher level in the 1st quarter of the year made the market get optimistic and the levels of volatility decreased. She asserted that the internal factors linking inflation with the economy were not the main contributors to the deteriorating business environment, stating that this would eventually turn around.
Reassessment of economic data
While assuming that at the start it may have appeared that the first quarter growth was poorer than anticipated, Yellen warned that it might well be a misgiving. These re-assessments of economic data helped to trigger a positive mood among the investors.
Impact of economic indicators
Initially, data showed signs of the economy contracting in the first quarter. The fact that inflation had weighed on oil prices before, as investors were dependent on Federal Reserve fluctuations, wasn’t an obstacle anymore.
Persistent supply concerns
Tensions in the Middle East including those on-going have imposed pressure on investors’ sentiment. The intensification of the Israeli air strikes on Rafah situation made things even worse for oil supply by already having planned for a large army operation which ignited the fear of potential oil disruptions.
Geopolitical unrest in the Middle East
The ongoing conflict in the Middle East, being most active between Israel and Gaza, continues to give rise to fears about regional peace. The fear of casualties in a higher amount drew in attention for international allies.
The oil price spike during the oil market optimism amidst economic growth and on-going supply issues highlights the complex link between geopolitics and oil markets and their ability to influence the direction oil markets take.