Oil prices were steady on Friday and little changed for the week as traders held on to hopes for a successful outcome from attempts to secure peace between the United States and Iran.
Brent futures were down 8 cents, or 0.11 per cent, at US$71.72 a barrel by 9:09 a.m. ET. West Texas Intermediate was down 22 cents, or 0.32 per cent, at US$68.47 a barrel.
Over the week, Brent and WTI have lost about 0.3 per cent.
U.S. markets will be closed on Friday ahead of the U.S. Independence Day holiday on Saturday.
On Thursday, the two oil benchmarks hit their lowest levels since before the U.S.-Israeli war on Iran began in late February.
Oil prices were under pressure as investor hopes of a full reopening of the Strait of Hormuz were buoyed by peace talks between the U.S. and Iran, Commerzbank analysts said.
“The U.S.-Iran dealmaking process remains fragile but continues for now, as the question of Strait of Hormuz tolls and administration remains contentious,” Citi analysts wrote on Friday.
“We expect the MoU (memorandum of understanding) to hold, not because trust has suddenly emerged, but because the incentives to break are poor for both sides.”
Some shipping has resumed through the Strait of Hormuz, as called for under the initial U.S.-Iranian deal, but uncertainty is high after the two countries exchanged strikes last weekend following an Iranian attack on a cargo ship.
With the prospect of being able to ship more oil, Gulf producers are working to increase output.
Kuwait’s oil production rose sharply to 1.65 million barrels per day in June, from 580,000 bpd in May, a source close to the matter told Reuters on Thursday.
At least five supertankers carrying a total of 10 million barrels of Saudi oil have left the Strait of Hormuz and Saudi Aramco has switched to spot pricing from longer-term contracts to speed sales in Asia, according to trade sources and shipping data.
“A sustained recovery in crude prices is more likely to materialize once the oil currently stranded on tankers and held in storage has been absorbed by the market, and if the recovery in production proves insufficient to offset volumes transiting the Strait of Hormuz,” PVM analyst Tamas Varga said.
As the availability of supplies grows, the market structure has turned from backwardation to contango, reflecting decreasing expectation of future shortages.
The spread between front-month Brent and the six-month forward turned negative on July 1 for the first time this year.
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