Oil prices ended higher on Friday but posted a sharp weekly loss on uncertainty over Iran peace talks and the reopening of the Strait of Hormuz.
Prices for the commodity are expected to remain volatile next week on shipping risks as the strait remains closed by Iran.
Brent, the benchmark for two thirds of the world's oil, rose 0.94 per cent to settle at $103.54 a barrel. West Texas Intermediate, the gauge that tracks US crude, added 0.26 per cent to close at $96.60 a barrel.
Prices traded as high as 3 per cent during the session. For the week, Brent dropped 5.2 per cent, while WTI slid 8.3 per cent.
“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 a 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 should the Strait of Hormuz remain closed.
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.
Stock markets climb
Major stock markets, meanwhile, ended the week higher on hopes that the US-Iran war would find a resolution soon. US Secretary of State Marco Rubio had said that negotiations between Washington and Tehran had showed “some good signs”.
Wall Street indexes rose, with the Dow Jones Industrial Average settling nearly 0.6 per cent higher to hit a closing record.
Investors, however, also had to digest a University of Michigan survey that showed US consumer sentiment fell to a record low in May, and began their watch on the Federal Reserve as Kevin Warsh took over as chairman from Jerome Powell.
The S&P 500 added 0.4 per cent, while the tech-heavy Nasdaq Composite increased 0.2 per cent.
In Europe, London's FTSE 100 inched up 0.2 per cent, with investors cautiously optimistic on US-Iran talks. Frankfurt's Dax added 1.15 per cent, while Paris' CAC 40 climbed 0.37 per cent.
Earlier in Asia, Tokyo's Nikkei 225 surged about 2.7 per cent to close at a record high, on artificial intelligence stocks that tracked their US peers.
Hong Kong's Hang Seng index added the Shanghai Composite both added nearly 0.9 per cent.
Gold, meanwhile, fell about 0.7 per cent to $4,509.64 an ounce on a stronger dollar.
