Oil pares losses as Middle East tensions rise after U.S. air strike

By Ambar Warrick

Investing.com -- Oil prices trimmed early losses on Friday after a U.S. air strike on Iran-backed groups pushed up fears that rising tensions in the Middle East could disrupt supply, although concerns over weak demand and slowing economic growth still weighed.

The U.S. carried out precision air strikes on Iran-backed groups in east Syria, in retaliation for a suspected Iranian drone strike on a coalition base, the Pentagon said in a statement. The move brewed concerns over a further deterioration in U.S.-Iran relations, which in turn could disrupt crude supply from the Middle East.

Brent oil futures were flat at $75.92 a barrel, while West Texas Intermediate crude futures rose 0.1% to $70.00 a barrel by 02:24 ET (06:24 GMT). Both contracts had fallen as much as 0.5% each earlier in the session.

Oil prices fell on Thursday after the U.S. downplayed plans to immediately refill the Strategic Petroleum Reserve (SPR), with U.S. Energy Secretary Jennifer Granholm stating that it could take years for the government to refill the SPR. 

Her comments implied lesser buying action in oil markets over the near-term, and also offset prior signals from the Biden administration that it would begin replenishing the SPR if prices were consistently around $67 to $72 a barrel.

Sales by the Biden administration had pushed the SPR to a near 50-year low in 2022. The government is also set to release an additional 26 million barrels from the reserve as part of a congressional mandate.

Still, oil prices were set to rise between 3% and 5% this week, as they recovered from a recent tumble to 15-month lows. The collapse of several U.S. banks earlier this month pushed up concerns over an economic slowdown this year, which fed into fears that weak economic growth will dent crude demand. 

Concerns over a banking crisis were still in play, while a middling economic outlook from the Federal Reserve also dented markets.

Uncertainty over a production cut by the Organization of Petroleum Exporting Countries and allies (OPEC+) also weighed on crude markets, after a Reuters report suggested that the cartel will keep production unchanged during a meeting in early-April.