Oil prices little changed as US-Iran peace efforts hold
By Amanda Stephenson and Robert Harvey
Oil Market Overview and Geopolitical Influences
CALGARY and LONDON, July 3 (Reuters) - Oil prices ticked slightly higher on Friday but were little changed for the week as traders held on to hopes for a successful outcome from attempts to secure peace between the U.S. and Iran.
Current Oil Price Movements
Brent futures were up 30 cents, or 0.42%, at $72.10 a barrel by 13:22 ET. West Texas Intermediate was up 9 cents, or 0.13%, at $68.78 a barrel.
U.S. markets were closed ahead of the U.S. Independence Day holiday on Saturday.
Recent Lows and Market Sentiment
On Thursday, the two oil benchmarks hit their lowest levels since before the U.S.-Israeli war on Iran began in late February.
Investor hopes for a full reopening of the Strait of Hormuz are being buoyed by peace talks between the U.S. and Iran, Commerzbank analysts said.
Analyst Perspectives on US-Iran Negotiations
"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," Citi analysts said.
Strait of Hormuz and Oil Supply Dynamics
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. OPEC output in June rose by 3.3 million barrels per day month-on-month, according to a Reuters survey.
Production Increases in the Gulf Region
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.
Market Structure and Demand Outlook
"Overall, the recovery in Middle Eastern supply is outpacing our initial expectations while Chinese-depressed import demand remains weak," said Rory Johnston, founder of the Commodity Context newsletter.
As the availability of supplies grows, the market structure has turned from backwardation to contango, reflecting decreasing expectation of future shortages.
Brent crude for prompt delivery traded this week below contracts for delivery as far as six months into the future, the latest sign that increasing shipments through the Strait of Hormuz have caused a near-term glut.
(Reporting by Amanda Stephenson in Calgary and Robert Harvey in London, Sam Li in Beijing and Helen Clark in Perth; Editing by Mark Potter, David Goodman, Louise Heavens, Mark Porter and Bill Berkrot)