Oil retreats from above $100, but set for weekly rise on Middle East escalation

LONDON: Oil futures prices fell over 3% on Friday but are still set for hefty ‌weekly gains because of concerns about disrupted energy flows in the Red Sea and fears of further escalation in the U.S.-Israeli war with Iran.

Brent futures fell nearly $4, or 3.96%, to $96.70 a barrel at 0946 GMT, having settled above $100 in the previous session for the first ​time since May after Iran-aligned Houthis said they struck two Saudi oil tankers in the Red Sea.

The contract ​remained on course for a 9.7% advance this week.

West Texas Intermediate (WTI) futures were down $3.15 or ⁠3.42% at $89.04 a barrel, on track for a nearly 8% weekly rise.

"Major hubs of oil production or supply routes ​are surrounded by war... The short-term outlook is bullish," said PVM Oil Associates analyst John Evans.

U.S. President Donald Trump ​promised "major military punishment" for Iran and its Houthi allies after the strikes in the Red Sea.

Iran had been pressing the Houthis to close the Bab el-Mandeb gateway to the Red Sea if the U.S. continued to attack Iranian power infrastructure. It is the second most ​important route for energy shipments after the Strait of Hormuz at the mouth of the Gulf.

Additionally, the Houthis had declared ​on Monday that they were imposing a naval blockade on Saudi Arabia, which had been diverting its oil via pipeline to ‌get around ⁠Iran's closure of the Strait of Hormuz.

Daily vessel transits through the Strait of Hormuz were steady at three for each of the past three days, preliminary ship-tracking data from Kpler showed. Another two ships — including empty very large crude carrier Noble — also entered the Gulf via the strait on Thursday.

Meanwhile, at the Bab el-Mandeb strait, commodity vessel transits ​totalled 32 on July 23, ​up from 26 the day ⁠before, Kpler data showed, with two crossings for July 24 so far.

"In the right seas, ships are still moving... so it's not a complete blockade as some might have ​feared," said Giovanni Staunovo, a UBS analyst.

Analysts at JPMorgan said in a note that ​each additional ⁠month of disruption to oil supply would add around $7 to $8 a barrel to Brent, lifting monthly average prices to around $114 a barrel if disruptions extend to three months.

Elsewhere, Russia said on Friday that its forces had struck three Ukrainian ports overnight targeting ⁠infrastructure — including ​loading and unloading facilities and fuel reserves — which supported Kyiv's armed ​forces.

On Thursday, Kazakhstan's energy ministry said oil companies temporarily reduced production after suspected Ukrainian drone attacks forced the country's main Black Sea export terminal to ​close.