Oil prices saw a modest uptick on Friday, albeit marking a weekly decline, following Iran’s downplaying of a reported Israeli attack on its territory, signaling a potential de-escalation of tensions in the Middle East.
Brent futures settled higher by 18 cents, or 0.21%, reaching $87.29 a barrel.
The front month U.S. West Texas Intermediate (WTI) crude contract for May closed 41 cents higher, or 0.5%, at $83.14 a barrel, while the more active June contract concluded 12 cents higher at $82.22 a barrel.
Earlier during the session, both benchmarks surged over $3 a barrel in response to reported explosions in the Iranian city of Isfahan, attributed to an alleged Israeli attack. However, gains were tempered after Tehran minimized the incident, affirming its lack of intention to retaliate.
Tim Snyder, an economist at Matador Economics, commented, “It was nothing but a big show, and so the markets deflated as quickly as they spiked.”
The recent focus has been on Israel’s response to Iranian drone and missile attacks on April 13, which came in the wake of a presumed Israeli airstrike on April 1, targeting a building within Iran’s embassy compound in Damascus.
Additionally, U.S. lawmakers have appended sanctions on Iran’s oil exports to an impending Ukraine aid package, following Tehran’s recent strike on Israel.
Iran, ranked as the third-largest oil producer in the Organization of the Petroleum Exporting Countries (OPEC) according to Reuters data, remains a pivotal player in global oil dynamics.
Reports surfaced that the International Monetary Fund anticipates OPEC+ to commence increasing oil output from July.
Under the leadership of Saudi Arabia and Russia, OPEC+ members had previously agreed to extend voluntary output cuts of 2.2 million barrels per day (bpd) until the end of June, effectively supporting oil prices.
Despite a gradual unwinding of oil’s risk premium, prices have dipped around 3% since Monday, marking the largest weekly loss since February.
However, market participants are wary of potential disruptions in supply stemming from ongoing Middle Eastern tensions.
Analysts from Goldman Sachs and Commerzbank raised their Brent crude forecasts on Friday, citing geopolitical tensions alongside prospects of rising demand and restrained supply by OPEC and its allies (OPEC+).
“Oil demand is growing at a healthy pace, and supply should be constrained due to the extensions of the voluntary production cuts of OPEC+,” noted UBS analyst Giovanni Staunovo.
In a separate development, U.S. energy firms reportedly added oil and natural gas rigs for the first time in five weeks, as indicated by energy services firm Baker Hughes in its closely monitored report on Friday.
The uptick in the oil and gas rig count, serving as an early indicator of future output, climbed by 2 to 619 in the week ending April 19.
According to the U.S. Commodity Futures Trading Commission (CFTC), money managers trimmed their net long U.S. crude futures and options positions in the week ending April 16.
