Oil turned higher on Friday, reversing earlier losses driven by improving Middle East crude flows and a move by the Group of Seven countries to release emergency crude stocks in order to help bring global prices down, especially of diesel.

At 16:50 ET (20:50 GMT), Brent crude futures expiring in December added 0.5% to $102.79 a barrel, while U.S. West Texas Intermediate crude futures expiring in November gained 0.1% to $91.24 a barrel.

Despite Friday’s about turn, the crude contracts were headed for a weekly loss, though both posted significant September gains earlier in the week. Brent had shed 1.5% for the week, while WTI had fallen 1.2%.

Stalled diplomacy, rising crude flows
On Thursday, the Wall Street Journal reported that Washington was weighing the deployment of another aircraft carrier group and additional troops to the Middle East by the end of November, raising concerns that renewed military action against Tehran could threaten oil flows from the region.

President Donald Trump also told his aides that he expects to resume strikes on Iran that same month after the U.S. midterm elections, the WSJ added.

Iran’s state media on Friday said any aggression or threat would be met with a "painful" and "devastating response," citing a statement from the Islamic Revolutionary Guard Corps.

A lack of diplomatic progress between the U.S. and Iran has kept traders on edge.

There had been hopes earlier last month that the two sides would reach some kind of diplomatic breakthrough at the United Nations General Assembly in New York, but those were quickly dashed after Trump and Iranian counterpart Masoud Pezeshkian exchanged fiery speeches and negotiations between representatives of the nations on the sidelines yielded no tangible results.

Washington and Tehran remain at odds over control of the Strait of Hormuz. Trump this week asserted that the U.S. had control of the waterway through its naval blockade and economic sanctions, while also touting greater flows out of the vital corridor than "at any time" in hits history, including before the start of the war at the end of February.

Shipping data has indeed shown an uptick in crude flows this week. Total Middle East crude oil exports jumped 36% week-on-week to 17.92 million barrels per day, TankerTrackers.com said on Wednesday. The rise has also been driven by Saudi Arabia restarting its East-West Pipeline, which had been shut down for several days following drone attacks by Iran-backed Houthis.

Europe to release emergency stocks after White House pressure
The big headline on Friday was the Group of Seven’s move to help bring global oil prices under control. The countries said they would immediately release up to 100 million barrels of emergency crude stocks over the next four months under the coordination of the International Energy Agency.

"Facing unprecedented volatility in oil markets - with surging prices threatening economic stability and the well-being of our citizens - we have agreed on decisive, coordinated measures to stabilize immediate energy supplies, shield households and businesses from price shocks, and strengthen the long-term resilience of global energy systems," the G7 nations said in a statement.

Global diesel prices have surged amid the ongoing conflict in the Middle East and Ukrainian strikes on Russian energy infrastructure. In the U.S., the national average price of diesel hit a record high of $6.5276 per gallon on September 22, and currently hovers at $6.3726, according to AAA. The pressure at the pump comes ahead of the U.S. midterm elections.

Reuters earlier this week reported that the White House had urged the European Union to draw down emergency diesel inventories in an effort to lower global prices, citing two sources familiar with the effort. A Financial Times report later in the week said Trump was considering a range of measures, including a possible diesel export ban, to curb domestic prices.

"I asked for it. Europe has a lot of diesel and they’re going to be making a major world contribution — and so are we," Trump later told reporters.

"We’re not going to be doing the export ban," the U.S. president added.

Heating oil futures expiring in November had initially extended losses after the announcement from the G7, but then later turned higher and were last up 1.2% to $4.5559 per gallon.

Source: Investing.com

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