Oil prices were largely unchanged on Friday as geopolitical tensions surrounding the U.S.-Iran conflict continued to weigh on the market. Hopes for a near-term resolution were dashed after Hezbollah rejected a ceasefire proposal, a prerequisite for Iran’s participation in peace talks with the U.S.
Despite the uncertainty, crude benchmarks are set for their first weekly gain in three weeks, buoyed by fighting in the Middle East and limited traffic in the Strait of Hormuz. Analysts caution that falling global oil inventories could lead to price spikes, while OPEC maintains its demand growth forecast.
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Oil prices experienced minimal change on Friday, struggling to break free from recent declines. The market's direction is being heavily influenced by geopolitical uncertainties, particularly the ongoing U.S.-Israeli conflict with Iran. Hopes for a swift resolution were dampened after the Hezbollah militia rejected a new ceasefire proposal in Lebanon, a key condition set by Iran for any potential peace deal with Washington.
Brent crude futures saw a slight dip of 21 cents, or 0.22%, trading at $95.24 a barrel in early trading. This followed a more significant drop of 2.84% in the previous session. Similarly, U.S. West Texas Intermediate (WTI) crude registered a small loss of 10 cents, or 0.11%, to settle at $92.94 a barrel, after a 3.1% decline on Thursday.
Despite the recent volatility, both crude benchmarks are on track to record their first weekly gain in three weeks. WTI, in particular, is poised for an advance of over 6%. This resilience is attributed to the flare-up of fighting in the Middle East, the protracted peace talks between the U.S. and Iran, and the continued limited traffic in the Strait of Hormuz, a critical chokepoint for global oil supply, through which approximately one-fifth of the world's oil passes.
Analysts are also highlighting concerns about dwindling global oil inventories, which could potentially trigger a price surge in the third quarter. The rejection of the U.S.-brokered ceasefire agreement by Hezbollah leader Naim Qassem on Thursday has added a layer of complexity to the situation. Meanwhile, U.S. President Donald Trump expressed optimism on Thursday regarding progress between Israel and Lebanon, stating that Lebanon deserves peace.
"Any optimism remains heavily clouded by a tangled web of headlines and counter-headlines," noted IG market analyst Tony Sycamore. He added, "From a technical perspective, as long as (WTI) crude oil remains above trendline support in the low $80s, the risks remain skewed to the upside."
In related news, the Organization of the Petroleum Exporting Countries (OPEC) remains steadfast in its oil demand growth forecast of 1.2 million barrels per day for the current year, according to Secretary General Haitham Al Ghais. This projection holds despite the ongoing Middle East conflict and the closure of the Strait of Hormuz. Furthermore, shipping data indicates that Iranian oil exports have fallen to a six-year low, primarily due to a U.S. naval blockade, though weak demand in China has also contributed to price pressures on oil.
