Oil prices traded little changed on Friday as investors took advantage of recent weakness to cover bearish positions ahead of the U.S. holiday weekend, although expectations of stronger crude supplies continued to limit further gains.
Brent crude, the global benchmark, rose 0.2% to $71.96 a barrel at 05:21 ET (09:21 GMT), while U.S. West Texas Intermediate crude was broadly unchanged at $68.66 a barrel.
Recent trading reflects the continued unwinding of the geopolitical premium that built up during the Iran conflict. Improving crude exports from the Gulf have strengthened expectations of comfortable short-term supplies, while weaker-than-expected U.S. employment data reduced expectations of an imminent Federal Reserve interest rate increase. Meanwhile, the U.S. dollar remained broadly stable, helping to support commodity prices.
U.S.-Iran negotiations remain closely watched
Market participants continued to follow diplomatic developments after U.S. President Donald Trump said he believed Iran had “agreed to just about everything we need,” suggesting negotiations were progressing positively.
However, The Wall Street Journal reported that Tehran has rejected a proposal that would require it to relinquish its claims over the Strait of Hormuz in return for access to billions of dollars in frozen Iranian assets. According to the report, Washington offered financial incentives, including the release of frozen funds, in exchange for unrestricted navigation through the strategic shipping route, but Iran has so far refused the proposal.
The conflicting signals have kept geopolitical uncertainty in focus, despite easing concerns over an immediate disruption to Gulf oil exports.
Oversupply outlook continues to pressure crude
Analysts at ANZ said the recent increase in short positions has contributed significantly to the weakness in oil futures, although some traders reduced bearish positions before the U.S. holiday.
The bank noted that Brent’s futures curve remains in contango, with near-term contracts trading below longer-dated contracts, reflecting expectations of excess supply in the months ahead. Recovering shipments through the Strait of Hormuz and Saudi Arabia’s exports returning to around 90% of pre-conflict levels have reinforced that view.
Lower oil prices have also encouraged buying by China’s independent refiners, supported by more competitive pricing from Saudi Arabia and Kuwait. Nevertheless, ANZ said Iran continues to face difficulties placing its crude on international markets, with more than 58 million barrels held in floating storage and over 90% of those volumes still without confirmed buyers, according to Vortexa.
Investors will continue to monitor progress in U.S.-Iran negotiations, crude exports from the Gulf and signs of stronger demand after the U.S. holiday for further direction in oil markets.