Oil prices barely moved on Friday as U.S. markets prepared to close ahead of the Independence Day holiday on Saturday, with investors cautiously watching diplomatic efforts aimed at ending hostilities between the United States and Iran.
Brent crude futures edged up 7 cents, a gain of 0.1%, reaching $71.87 per barrel as of 0737 GMT. West Texas Intermediate, another key benchmark, slipped 6 cents, or 0.09%, to $68.63 per barrel.
U.S. financial markets are closed Friday in observance of the Independence Day holiday falling on Saturday.
In the previous trading session, both benchmarks dropped to their lowest points since before the U.S.-Israeli military campaign against Iran began in late February. For the week, Brent was down just 0.16% and WTI fell only 0.87% — the smallest weekly price moves for both in several months.
Tim Waterer, chief market analyst at KCM Trade, described the mood in the market as cautiously hopeful. “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,” he said.
Some vessel traffic has resumed through the Strait of Hormuz, as outlined in the initial agreement between Iran and the United States. However, uncertainty remains elevated after the two nations exchanged military strikes last weekend, following an Iranian attack on a cargo ship.
With the prospect of increased oil flow through the strait, Gulf-region producers have been working to boost their output. Kuwait’s oil production surged to 1.65 million barrels per day in June, up sharply from 580,000 barrels per day in May, according to a source familiar with the situation who spoke to Reuters on Thursday.
At least five large supertankers carrying a combined 10 million barrels of Saudi oil have already cleared the Strait of Hormuz. Additionally, Saudi Aramco has shifted from long-term contracts to spot pricing in order to accelerate sales in Asian markets, according to trade sources and shipping data.
As the supply picture improves, the structure of the oil market has shifted from backwardation — where near-term prices are higher than future prices — to contango, which signals reduced concern about future shortages. The spread between front-month Brent and one-month forward contracts turned negative on June 24, and the six-month spread followed suit on Thursday.
Analysts at ING noted in a Friday report that the reintroduction of this supply is happening alongside continued releases from the U.S. Strategic Petroleum Reserve. They added that the lower near-term prices could attract more buyers, which in turn may provide some support for prices going forward.
