Oil is expected to remain volatile next week amid uncertainty over Iran peace talks and the reopening of the Strait of Hormuz, a vital artery for the flow of global crude and liquefied natural gas that remains shut on Iran threats and shipping risks.
Brent, the benchmark for two thirds of the world's oil, rose 2.53 per cent to $105.2 a barrel at 10.54am UAE time on Friday, while West Texas Intermediate, the gauge that tracks US crude, was trading 1.99 per cent higher at $98.27 a barrel.
Brent is projected to post about a 4 per cent weekly drop, while WTI is on track to end the week nearly 7 per cent lower, as uncertainty continues to surround peace talks.
“The uncertainty regarding peace negotiations will remain in the driver's seat and depending on the outcome, or the lack thereof, oil prices will move up or down,” Ipek Ozkardeskaya, a senior analyst at Swissquote, told The National.
“In the absence of material progress, we could see US crude jump back above the $100 per barrel level.”
Oil prices rose on Friday following three days of declines following conflicting news about the progress made on the Iran peace deal.
US Secretary of State Marco Rubio said on Thursday that Iran’s toll system in the Strait of Hormuz was unacceptable, adding “some progress” had been made in talks with Tehran.
“We've always said a tolling system in the strait would be unacceptable. But we don't say that, the world says that,” Mr Rubio said.
“It would make a diplomatic deal unfeasible. So it's a threat to the world that they would try to do that and it's completely illegal.”
He added that diplomacy, however, remains a priority to reach a deal, with the two countries still divided on Tehran's uranium stockpile and controls on the strait.
“The key question is not only whether US-Iran talks produce progress. The real question is whether diplomacy can translate into barrels,” Ahmed Al Juqqa, head of financial market research at Equiti Group, said.
“A ceasefire headline may take some risk premium out of the market, but [oil] prices are unlikely to fall sharply unless shipping flows, insurance conditions, port operations and Gulf export routes start to normalise.”
This week, Dr Sultan Al Jaber, Minister of Industry and Advanced Technology, highlighted risks to global oil markets amid a continued Hormuz closure.
During an online discussion with the Atlantic Council in Washington this week, Dr Al Jaber said if the conflict ended tomorrow, it could take at least four months to return to 80 per cent of energy flows recorded before the war, and that full flows may not return until the first or second quarter of 2027.
The Iran war, that started on February 28, following attacks by Israel and the US on Tehran, led oil prices to spike on supply concerns from the Middle East producers and the near closure of the Strait of Hormuz.
Investors will also be closely watching the US inventory data to get clues on market fundamentals.
The previous data showed commercial crude stocks falling by 7.86 million barrels, while refinery utilisation stayed high at 91.6 per cent.
“The next report will help show whether high prices are starting to damage demand, or whether the market is still being forced to pull barrels from storage to meet consumption and export needs,” Mr Al Juqqa said.
