Oil markets were on edge as benchmarks reclaimed gains Friday after an initial dip following a U.S. policy move intended to shore up domestic fuel production.
By 23:54 ET (00:54 GMT), Brent futures for December were trading at $113.64 a barrel, up 0.4%. West Texas Intermediate (WTI) December contracts were at $100.02 a barrel, rising 0.56%. Both contracts sat near their loftiest levels since early May and were trading roughly 3% higher for the week.
The early sell-off in prices came after the U.S. president determined that petroleum production and refining were essential to national defense, activating a Cold War-era framework intended to accelerate fuel output. The action included invoking portions of the Defense Production Act that allow for financial incentives tied to oil and gas activities.
Those measures are aimed at countering sharply higher U.S. fuel prices that have been driven in part by disruptions to global refining and shipping linked to conflict in the Middle East. The policy move briefly pushed prices lower, but the market soon reversed direction as concerns about supply interruptions reasserted themselves.
Market participants continued to weigh the prospect that heightened tensions in the Middle East - notably clashes between Saudi Arabia and Yemen's Houthi rebels and repeated attacks in the Strait of Hormuz - could intensify supply constraints. This geopolitical backdrop, combined with related events, underpinned the resilience in oil prices despite the U.S. announcement.
The Houthi group carried out a series of strikes this week that included attacks on several government sites in Riyadh, a Saudi Aramco facility in Yanbu, and two separate airports. Reports that American diplomats and family members were being evacuated from Riyadh contributed to market unease.
Other reports indicated that the United States and Israel were contemplating renewed military action against Iran after the U.S. midterm elections on November 3. Those developments, as reported, added to the perception of elevated risk for oil flows in the region.
Separately, ongoing hostilities between Russia and Ukraine also factored into the risk calculation, keeping markets cautious about potential additional supply shocks. Kyiv has signaled openness to a trilateral summit with the United States, although there has been limited progress toward a peace agreement, according to available reports.
Analysts noted that while the invocation of the Defense Production Act unlocks tools such as financial incentives to spur oil and gas-related activity, any new investments in domestic production are unlikely to translate into immediate increases in supply. That temporal gap limits the near-term effect such policy measures can have on calming global markets.
The timing of the U.S. measures was also connected to domestic political considerations, as authorities seek to ease elevated energy costs ahead of the November 3 elections. Reducing retail fuel prices has been cited as a priority amid broader concerns about inflation and consumer costs.
For now, the market remains sensitive to further escalations. Continued attacks in strategic shipping lanes or on infrastructure within the Arabian Peninsula, broader military action involving regional actors, or additional developments in the Russia-Ukraine conflict would all feed into the prevailing view that supply disruptions could persist or worsen.
Market snapshot:
- Brent December futures: $113.64 per barrel, +0.4% (23:54 ET / 00:54 GMT)
- WTI December futures: $100.02 per barrel, +0.56%
- Both contracts near their highest levels since early May and up about 3% on the week