Oil set for 3% weekly gain on rising Mideast tensions, better US outlook

Representational photo. An oil jack can be seen with an Iranian flag at the background. Reuters

Oil prices edged down in early Asian trading on Friday but were on track to gain more than 3% for the week as US jobs data calmed demand concerns and fears of a widening Middle East conflict persisted.

Brent crude futures fell 9 cents, or 0.11%, to $79.07 a barrel by 0030 GMT US West Texas Intermediate crude futures were down a cent at $76.09 per barrel.

However, both Brent and WTI were set to gain more than 3% on a weekly basis.

Israeli forces stepped up airstrikes across the Gaza Strip on Thursday, killing at least 40 people, Palestinian medics said, in further battle with Hamas-led militants as Israel braced for potential wider war in the region.

"Crude oil continued it recovery from its recent plunge as elevated geopolitical risks came into focus," ANZ analyst Daniel Hynes said.

The killing of senior members of militant groups Hamas and Hezbollah last week had raised the possibility of retaliatory strikes by Iran against Israel, stoking concerns over oil supply from the world's largest producing region.

Iran-aligned Houthi militants continued attacks on international shipping near Yemen this week in solidarity with Palestinians in the war between Israel and Hamas.

The United Kingdom Maritime Trade Operations (UKMTO) agency said on Thursday it had received a report of an incident near the coast of Mokha, a port city in Yemen.

Also lending some support, Libya's National Oil Corp declared force majeure at its Sharara oilfield from Wednesday, a statement said, adding that the company had gradually reduced the field's production because of protests.

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Prices were buoyed after data showed the number of Americans filing new applications for unemployment benefits fell more than expected last week, suggesting fears the labour market is unraveling were overblown and easing recession concerns.

The dollar on the jobs data. A stronger dollar tends to lower oil prices as buyers using other currencies have to pay more for their dollar-denominated crude.