Oil prices edged higher on Friday as traders adopted cautious optimism ahead of the U.S. Independence Day holiday, with markets closely watching efforts to secure a fragile peace deal between the United States and Iran.
Brent crude rose 46 cents, or 0.64%, to $72.26 a barrel at 0407 GMT, while West Texas Intermediate gained 32 cents, or 0.47%, to $69.01 a barrel.
U.S. financial markets are closed on Friday in observance of the July 4 holiday.
In the previous session, both benchmarks had fallen to their lowest levels since before the U.S.-Israeli conflict with Iran began in late February. For the week, Brent is up 0.35% and WTI 0.43%, marking their smallest weekly movements in months.
Market analysts say sentiment remains fragile.
“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.
Shipping activity has begun to recover in the Strait of Hormuz after a preliminary U.S.–Iran understanding called for easing tensions, following last weekend’s exchange of strikes triggered by an Iranian attack on a cargo vessel.
Oil producers in the Gulf have also started ramping up output as the strategic waterway reopens. Before the conflict, the Strait of Hormuz handled roughly one-fifth of global oil and liquefied natural gas flows.
In Kuwait, 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 data, as the country increased exports following the interim peace arrangement.
Meanwhile, at least five supertankers carrying around 10 million barrels of Saudi crude have transited the Strait of Hormuz. Saudi Aramco has also shifted to spot pricing in a move aimed at accelerating sales into Asian markets, according to trade and shipping sources.
The return of supply has added pressure to the market. On June 24, the spread between front-month Brent and the one-month forward contract turned negative, with the six-month spread following suit on Thursday—signalling a contango structure, where future prices exceed near-term contracts.
Analysts at ING noted that the combination of returning supply and ongoing U.S. Strategic Petroleum Reserve releases is influencing market dynamics.
“With the forward curve moving into contango, we could start to see more buying in the market,” the bank said in a note.