Oil prices were on track for their sharpest weekly drop since March 2023 on Friday, as the lack of major supply disruptions from the Israel-Iran conflict caused risk premiums to quickly unwind.
By 06:37 GMT, Brent crude futures were up 36 cents (0.53%) at $68.09 per barrel, while U.S. West Texas Intermediate (WTI) crude gained 33 cents (0.51%) to trade at $65.57. Despite the slight gains, both benchmarks were heading toward a weekly decline of roughly 12%.
Prices have now returned to levels seen before June 13, when Israel launched strikes on Iranian military and nuclear installations, triggering initial fears of broader regional conflict.
At the start of the week, crude prices surged to five-month highs after the U.S. carried out strikes on Iranian facilities over the weekend. However, those gains quickly reversed, hitting their lowest point in over a week by Tuesday, after President Donald Trump announced a ceasefire between Israel and Iran.
For now, traders and analysts say the conflict has not materially disrupted global oil supply.
“In the absence of a clear threat to oil production or transport, the market remains oversupplied,” analysts at Macquarie said in a note on Thursday. They estimate a surplus of around 2.1 million barrels per day for 2025.
Macquarie raised its price forecasts for WTI crude by $2, now projecting an average of $67 per barrel this year and $60 in 2026, incorporating a modest geopolitical risk premium.
Later in the week, oil prices saw minor support after U.S. government data revealed a drop in crude and fuel stockpiles from the prior week, as refinery output and demand increased. [EIA/S]
“The market is beginning to realize that crude inventories have suddenly become quite tight,” said Phil Flynn, senior market analyst at Price Futures Group.
Also lending support to oil prices was a Wall Street Journal report suggesting that President Trump could announce his pick for the next Federal Reserve chair sooner than expected. This boosted speculation over near-term rate cuts in the U.S., which typically help stimulate oil demand by supporting economic activity.
