Oil prices were largely steady on Friday as investors remained cautiously optimistic that diplomatic efforts between the United States and Iran could help preserve stability in the Middle East, ahead of the U.S. Independence Day holiday weekend. International benchmark Brent crude gained 7 cents, or 0.1 per cent, to trade at $71.87 per barrel by 0737 GMT, while U.S. West Texas Intermediate (WTI) crude slipped 6 cents, or 0.09 per cent, to $68.63 per barrel. Trading activity was subdued as U.S. financial markets remained closed on Friday ahead of the Independence Day holiday.
Both benchmarks had fallen to their lowest levels since before the U.S.-Israeli conflict with Iran escalated in late February during the previous trading session. On a weekly basis, Brent was down 0.16 per cent, while WTI declined 0.87 per cent, marking their smallest weekly swings in several months.
Market participants continued to monitor developments in the Middle East, with expectations that ongoing peace efforts could help reduce geopolitical risks, although uncertainty remained.
"It's a case of guarded optimism, with the market wanting to believe the peace efforts will hold, but it's still hedging its bets until it sees real evidence on the water," said Tim Waterer, chief market analyst at KCM Trade.
Oil Market Remain Uncertain Despite Hormuz Shipping Resume
Some shipping activity has resumed through the Strait of Hormuz in line with the initial agreement between Iran and the United States, but uncertainty continues to cloud the market after the two countries exchanged military strikes last weekend following an Iranian attack on a cargo vessel.
With the possibility of exporting more crude, Gulf oil producers are ramping up output. Kuwait increased its oil production significantly to 1.65 million barrels per day (bpd) in June, up from 580,000 bpd in May.
Shipping data and trade sources also show that at least five supertankers carrying a combined 10 million barrels of Saudi crude have successfully passed through the Strait of Hormuz. Meanwhile, Saudi Aramco has shifted from long-term contract pricing to spot pricing for Asian buyers in a move aimed at accelerating crude sales.
The increase in available supplies has begun reshaping the oil market, with its structure moving from backwardation to contango, a sign that traders are becoming less concerned about near-term supply shortages.
The price spread between front-month Brent crude and the one-month forward contract slipped into negative territory on June 24, while the six-month Brent spread also turned negative on Thursday.
"The return of this supply coincides with continued SPR releases," ING analysts said in a note on Friday, referring to releases from the U.S. Strategic Petroleum Reserve.
The analysts added that the availability of cheaper prompt supplies could encourage buying activity, a development that may provide support for oil prices. Reuters
