Oil heads for weekly loss as the premium for geopolitical risk declines

With Middle East tensions easing supply concerns and expectations that the U.S. Federal Reserve would continue raising interest rates in the largest oil-consuming country in the world buoyed by jobs statistics, oil prices dipped on Friday, on track for a weeklong loss.

Futures for Brent crude dropped $1.21, or 1.4%, to $85.64 per barrel, while those for U.S. West Texas Intermediate crude dropped $1.25, or 1.5%, to $81.21 per barrel. Although both benchmarks were expected to lose more than 5% this week, they gained more over $2 a barrel on Thursday.

Still, geopolitical issues took center stage. “The oil market will be watching for an escalation of tensions, particularly on the Lebanese border, as Hezbollah attacks increase, director of the City Index, stated.

Oil prices were sustained this week as some risk appetite returned to the markets by the Bank of England maintaining rates at a 15-year high and the Fed holding interest rates constant. Based on analyst predictions, Saudi Arabia is expected to reconfirm, on the supply side, the extension of its voluntary oil output cut of one million barrels per day through December.

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