Oil prices were nearly unchanged for the week as investors continued to monitor diplomatic efforts aimed at securing a peace agreement between the United States and Iran. Market sentiment remained supported by hopes that tensions in the Middle East could ease, allowing oil shipments through the Strait of Hormuz to gradually return to normal.

Oil Prices Move Slightly During the Week

By the end of the week, Brent crude futures rose slightly by 14 cents, or 0.19%, to $71.94 per barrel. However, compared with the previous Friday’s close, Brent was only around 5 cents lower.

Meanwhile, U.S. West Texas Intermediate crude gained 9 cents, or 0.13%, to $68.78 per barrel. Trading volume was relatively light as U.S. markets were closed ahead of the Independence Day holiday.

Earlier on Thursday, both crude benchmarks had fallen to their lowest levels since before the U.S.-Israeli conflict with Iran began in late February.

Hopes for a Full Reopening of the Strait of Hormuz Support Market Sentiment

One of the key factors currently influencing the oil market is the prospect of a full reopening of the Strait of Hormuz, one of the world’s most important oil shipping routes.

Analysts said hopes for progress in U.S.-Iran peace talks have helped reduce concerns over potential supply disruptions. However, the process remains fragile, especially as issues related to shipping tolls and the administration of the Strait of Hormuz remain unresolved.

Still, some shipping activity has already resumed under the initial agreement between the two sides. This has raised expectations that Middle Eastern oil supply could recover faster than previously anticipated.

Middle Eastern Supply Recovers Strongly

As the outlook for oil transportation improves, Gulf producers are working to increase output.

According to a Reuters survey, OPEC oil production in June rose by 3.3 million barrels per day compared with the previous month. Kuwait’s oil output also increased sharply to 1.65 million barrels per day in June, up from 580,000 barrels per day in May.

In addition, at least five supertankers carrying a total of around 10 million barrels of Saudi oil have left the Strait of Hormuz. Saudi Aramco has also shifted toward spot pricing instead of longer-term contracts in order to speed up sales to Asian buyers.

Supply Is Rising, but Demand Remains Uncertain

Although Middle Eastern supply is recovering faster than expected, weak import demand from China remains a key pressure point for the oil market.

As available supply increases, the market structure has also started to reflect lower expectations of future shortages. Prompt Brent crude has traded below some longer-dated contracts, suggesting signs of a near-term supply surplus.

In simpler terms, the market was previously worried about not having enough oil. Now, it is beginning to worry that there may be more oil than demand can absorb. Commodity markets, naturally, have found yet another way to be annoying.

Conclusion

Oil prices are currently moving sideways as investors wait for clearer signals from the U.S.-Iran peace process. If negotiations continue to progress and the Strait of Hormuz fully reopens, oil supply could recover further, potentially adding downward pressure on prices in the short term.

However, geopolitical risks have not disappeared completely. Any renewed disruption in the Middle East could quickly trigger stronger volatility in oil prices.

Source: Reuters