Oil Prices head for weekly gains on mideast tensions

Oil prices fell on Friday but were headed for a second straight weekly gain as investors weighed the probable effect of hurricane-damaged US demand against the specter of supply disruption from rising Middle Eastern tensions.

Brent crude futures declined 60 cents, or 0.8 percent to $78.80 a barrel. US West Texas Intermediate (WTI) crude lost 57 cents, 0.8 percent to $75.28 per barrel by 0957 GMT. However, both benchmarks are going to end the week higher.

Barclays analysts said in the client report that a possible Israeli strike on Iranian oil infrastructure portends a "binary outcome" for the oil market: either enough supply to alleviate spare capacity concerns, or significant geopolitical risks that would redouble market volatility.

IG market strategist Yeap Jun Rong points out that the uncertainties over high crude inventories and a slowing pace of monetary easing by the U.S. Federal Reserve tempered the recent price rally. In the United States, Hurricane Milton pounded Florida and then chugged into the Atlantic Ocean Thursday, causing major damage, deaths, and massive power disruptions. Storm's devastating effects may slow fuel use in parts of the world's largest oil producer and consumer.

The first half of the month saw crude prices increase due to Iran firing more than 180 missiles against Israel on October 1, which may urge further action against Iranian oil facilities. Israel has not taken any counteraction yet, and the oil benchmarks remained unchanged throughout the week.

Israeli Defence Minister Yoav Gallant said that any military response would be "lethal, precise, and surprising." Iran supports several militant groups opposed to Israel, including Hezbollah in Lebanon, Hamas in Gaza, and the Houthis in Yemen.

Of course, the Gulf states, too, are concerned and appealing to Washington to intervene and thereby avoid any Israeli attack on Iran's oil facilities, which they fear will damage their oil infrastructure at the hands of Iranian proxies. The supply side: Libya's National Oil Corporation announced that it had returned its production nearly back to pre-central bank crisis levels, to 1.22 million barrels per day.