Oil prices continued their upward trajectory on Friday, boosted by supply concerns stemming from drone attacks on northern Iraqi oilfields and robust market fundamentals amid strong summer demand.
Brent crude futures increased by 29 cents, or 0.40 percent, reaching $69.81 a barrel as of 04:51 GMT (currently trading above $69.85), while U.S. West Texas Intermediate crude futures rose by 27 cents, or 0.42 percent, to $67.81 a barrel (currently trading at $67.85).
“Oil gained 1 percent in yesterday’s session, buoyed by strong U.S. data despite ongoing tariff uncertainty. This helped ease concerns about the health of the economy and fueled a risk-on mood. Although OPEC+ is relaxing output curbs at a rapid pace, near-term conditions indicate tightness in the crude oil market. This is apparent from futures contracts for crude oil and gasoil, which remain in backwardation, indicating that traders are paying a premium to secure immediate supplies,” Vijay Valecha, chief investment officer, Century Financial told Economy Middle East.
“Tightness in the European and American diesel markets is also lending near-term support to prices, particularly when seasonal demand is at its peak. Nevertheless, in the long run, oil markets could experience a glut as supply is projected to outpace demand,” he noted.
The recent four days of drone attacks on oilfields in Iraqi Kurdistan, which have curtailed half of the region’s output, have underpinned prices, pushing both contracts up by $1 on Thursday. Trump postponed action on Russia this week, diminishing speculation regarding imminent sanctions that had previously bolstered prices late last week. Instead, he provided Russia with a 50-day window to resolve the conflict in Ukraine.
Seasonal demand boosts market
Moreover, seasonal travel demand has further strengthened the market. In the first two weeks of July, global oil demand averaged 105.2 million barrels per day (bpd), an increase of 600,000 bpd from the previous year and largely aligning with forecasts, according to analysts from JPMorgan in a research note.
U.S. crude inventories experienced a larger-than-anticipated decline last week as exports surged, as reported by government data on Wednesday. Demand in Asia also rose as refineries resumed operations after maintenance, coinciding with peak seasonal demand.
Near-term oil fundamentals are expected to remain favorable, with the market likely to remain relatively tight throughout this quarter before becoming better supplied in the final three months of the year, ING analysts said on Friday as quoted by Reuters. However, uncertainty surrounding U.S. tariff policy, which seems unlikely to be resolved before August 1, is exerting downward pressure on the market. Plans by major oil producers to lift output cuts will additionally contribute to supply levels as the seasonal demand in the Northern Hemisphere summer concludes. For this week, both Brent and WTI saw declines of more than 1 percent.
Read more: Oil prices rise with Brent crude up 0.1 percent above $68.50 on strong demand data
U.S. crude inventories decline
Oil production in the semi-autonomous Kurdistan region has been reduced from approximately 280,000 bpd to between 140,000 bpd and 150,000 bpd, according to two energy officials.
Data from the U.S. Energy Information Administration (EIA) this week revealed that U.S. crude oil inventories fell by 3.9 million barrels, surpassing analysts’ expectations of a 1.8 million-barrel decrease, signaling tightening market conditions.
Earlier, the Organization of the Petroleum Exporting Countries (OPEC) maintained its oil-demand forecast for 2025 and 2026, expressing optimism that global trade tensions will ease in the near future. Oil prices surged nearly 3 percent last week as the International Energy Agency highlighted a constrained prompt market.
Despite OPEC+’s unexpected increase in output, the world oil market may be tighter than it appears, according to the agency’s report last week, as refineries ramp up processing to meet summer travel demand.
