Audio By Carbonatix
Oil prices edged up on Friday before a long holiday weekend in the U.S., as wary optimism held over efforts to secure peace in the Middle East between the United States and Iran.
Brent futures climbed 46 cents, or 0.64%, to $72.26 a barrel as of 0407 GMT. West Texas Intermediate was up 32 cents, or 0.47%, to $69.01 a barrel.
U.S. markets will be closed on Friday ahead of the U.S. Independence Day holiday on Saturday.
During the prior session the two benchmarks hit their lowest levels since before the U.S.-Israeli war on Iran began in late February. Brent for the week was up 0.35% and WTI up 0.43%, the smallest weekly movements for both in months.
“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 has partially resumed through the Strait of Hormuz, as called for under the initial deal between Iran and the United States, after the two countries exchanged strikes last weekend following an Iranian attack on a cargo ship.
Gulf producers are working to ramp up production with the reopening of the Strait of Hormuz, which prior to the beginning of the war carried one-fifth of the world’s daily supply of oil and liquefied natural gas.
Kuwait's oil production rose sharply to 1.65 million barrels per day in June from 580,000 bpd in May, a source familiar with the matter told Reuters on Thursday, as the OPEC member boosted exports following the U.S.-Iran interim peace agreement.
Also, at least five supertankers carrying a total of 10 million barrels of Saudi oil have exited the Strait of Hormuz, with Saudi Aramco switching to spot pricing to speed sales in Asia, according to trade sources and shipping data.
With growing supply pressure, the spread between front-month Brent and one-month forward turned negative on June 24, while the six-month spread turned negative on Thursday. When that spread is negative, the market is in contango.
"The return of this supply coincides with continued SPR releases," ING analysts said in a note on Friday, referring to the U.S. Strategic Petroleum Reserve.
They added that with "the forward curve moving into contango, we could start to see more buying in the market."
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