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Oil heads for weekly gain of around 8% after Saudi attacks

Oil heads for weekly gain of around 8% after Saudi attacks

NEW YORK (Reuters) – Oil prices rose more than 1% on Friday, with Brent set for its biggest weekly gain since January, lifted by rising Middle East tensions and supply concerns after an attack on Saudi Arabia’s energy industry last weekend.

Brent crude LCOc1 futures rose 74 cents, or 1.2%, to $65.14 a barrel by 1:02 p.m. EDT (1702 GMT). U.S. West Texas Intermediate (WTI) crude CLc1 futures rose 87 cents, or 1.5%, to $59.00 a barrel.

For the week, Brent was set to rise 8.1%, its biggest gain since January, while WTI was on track for a 7.5% increase, the most since June.

The oil market jumped nearly 20% on Monday in reaction to the Sept. 14 attack, which halved Saudi production and cut global supplies by about 5%. But prices have since pared most of those gains on assurances from the kingdom that it would restore lost production by the end of this month.

Prices, however, have kept a risk premium as geopolitical tensions in the region have escalated with the United States and Saudi Arabia blaming the attack on Iran. Tehran denies any involvement.

The attack has intensified a years-long struggle between Saudi Arabia and Iran, who are locked in a sometimes violent contest for influence in several flashpoints around the Middle East.

A Saudi-led coalition on Friday launched a military operation north of Yemen’s port city of Hodeidah while the United States worked with Middle East and European nations to build a coalition to deter Iranian threats.

State-owned Saudi Aramco has switched crude grades and delayed crude and oil product deliveries to customers by days after the attack severely reduced its light oil production and led to output cuts at its refineries, market sources said.

Whilst showing reporters the damaged the Khurais field and the Abqaiq oil processing facility, Aramco said it was shipping equipment from the United States and Europe to rebuild the damaged facilities. It also said that Abqaiq is expected to have full capacity restored by the end of the month.

“The question is can they convince the market that they can keep their oil fields safe,” said Phil Flynn, an analyst at Price Futures Group in Chicago, in a note.

In the United States, meanwhile, flooding from Tropical Storm Imelda forced a major refinery to cut production, while a key oil pipeline, terminals and a ship channel in Texas were shut, according to sources familiar with operations.

Pumpjacks are seen during sunset at the Daqing oil field in Heilongjiang province, China August 22, 2019. REUTERS/Stringer

Exxon Mobil Corp (XOM.N) shut some units at its 369,024 barrel per day (bpd) Beaumont refinery while Valero Energy Corp (VLO.N) reduced production at its 335,000 bpd Port Arthur refinery.

“Going into the weekend there will be a lot of short-covering, which will support prices,” said Olivier Jakob of consultant Petromatrix.

U.S. energy firms this week reduced the number of oil rigs operating for a fifth week in a row to the lowest since May 2017. Drillers cut 14 oil rigs in the week to Sept. 20, bringing the total count down to 719, General Electric Co’s (GE.N) Baker Hughes energy services firm said. RIG-OL-USA-BHI

Addiitonal reporting by Julia Payne in London and Florence Tan in Singapore; Editing by Marguerita Choy and David Goodman

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