Oil benchmarks continued their weekly downward streak on Friday, with both WTI and Brent hovering near pre-war levels as shipping recovers, while easing US-Iran peace tensions continue to weigh on prices.
West Texas Intermediate settled at $68.78 /bbl, down from $70.24/bbl the previous week, while Brent closed at $71.94 /bbl from $73.15/bbl a week earlier.
Brent and WTI contracts fell for their fourth straight week, down about 0.2% and 0.8%, respectively.
Analysts noted that the primary bearish trigger for the market has been a rapid pick-up in commercial tanker traffic navigating the reopened Strait of Hormuz, which has significantly eased concerns over global supply shortages.
The sudden return of these physical barrels, combined with ongoing releases from the US Strategic Petroleum Reserve, has placed intense pressure on the front end of the forward curve, pushing Dubai deeper into contango and dragging Brent down, ING analysts said.
Brent trades near unchanged on the week, having returned to pre-war levels, with support emerging ahead of $70, Saxo Bank strategists said, adding that this may signal that the ongoing recovery in supply flows through the Strait of Hormuz is now largely priced in.
Despite the week's overarching bearish sentiment, trading actually began with an initial price spike on Monday.
Crude futures rose after US Central Command launched retaliatory airstrikes over the weekend against Iranian military targets following a drone attack on a commercial vessel.
However, these gains rapidly evaporated during Asian trading hours after Washington and Tehran agreed to halt active hostilities and implement a temporary ceasefire to restore shipping lanes.
Early in the week, Washington indicated that teams were convening in Doha to iron out implementation details, while Iran's Deputy Foreign Minister Kazem Gharibabadi explicitly denied that any working-group meetings were scheduled.
As the week progressed, positive diplomatic rhetoric and shifting supply fundamentals continued to push prices downward.
On Wednesday, benchmarks dipped over 1% as President Trump stated that discussions with Iran were going very well.
Adding momentum to the thaw, Iranian President Masoud Pezeshkian announced that certain international financial and foreign-exchange restrictions on Iran had already been eased, allowing sustained crude exports.
Meanwhile, separate indirect meetings mediated by Qatar and Pakistan in Doha reportedly yielded positive progress on the US-Iran memorandum of understanding.
However, energy market analysts remain highly cautious about midstream risks.
Kpler reported that the reopened shipping corridors remain fraught with compliance risks, leaving commercial vessel operators caught between Iranian demands for tightly regulated, heavily tolled exits and strict retaliatory penalties from the US.
On the domestic front, Trump issued a firm directive ordering gasoline retailers to immediately cut retail pump prices toward a $2.50-per-gallon target.
Simultaneously, a sharp draw in US crude inventories shifted market attention. Data from the Energy Information Administration confirmed that commercial crude oil inventories decreased by 3.8 million barrels to 408.4 million barrels for the week ended June 26.
US Strategic Petroleum Reserve inventories also dropped sharply by 5.5 million barrels, down to 325.7 million barrels.
Geopolitics shifted elsewhere on Wednesday when Ukrainian long-range air strikes struck Russia's oil refinery complex, an attack that Ukrainian President Volodymyr Zelenskyy noted would heap further pressure on a foe already plagued by growing domestic fuel shortages.
By Friday, the immediate sell-off stalled as investor positioning ahead of the US holiday weekend triggered short-covering and position squaring.
Analysts noted that while the front end of the curve looks heavily supplied today, this initial wall of returning physical supply may soon be fully absorbed by these emerging structural demand forces.
Rig activity rose over the week with the US oil rig count up by five from 440 the previous week to 445 in the week ending July 2, according to data from Baker Hughes (BKR) released Thursday. That compares with 425 oil rigs in operation a year earlier.
The consolidated North American oil and gas rig count, a key early indicator of future production levels, remained unchanged at 770 from last week.
Meanwhile, market participants are eyeing another widely expected incremental hike in oil output as members of the Organization of the Petroleum Exporting Countries and allies meet on Sunday.
The meeting comes amid media reports last week that the founding member, Iraq, has threatened to leave the producer cartel over quota disagreements.
Iraq's oil ministry reportedly denied last week that the country was considering leaving OPEC, saying the claims did not reflect the government's official position.
The warning follows the UAE's recent exit from OPEC and could mark one of the most significant setbacks in the group's history, as Iraq is OPEC's second-largest producer.