By Nicole Jao
NEW YORK (Reuters) -Oil edged higher on Friday, but notched a weekly decline, after Iran downplayed a reported Israeli attack on its territory, a sign that an escalation of hostilities in the Middle East could be avoided.
Brent futures rose 18 cents, or 0.21%, to $87.29 a barrel.
The U.S. West Texas Intermediate (WTI) crude contract for May ended 41 cents higher, or 0.5%, at $83.14 a barrel. The more active June contract closed 12 cents higher at $82.22 a barrel.
Both benchmarks rose more than $3 a barrel earlier in the session after explosions were heard in the Iranian city of Isfahan, which sources described as an Israeli attack. However, gains were limited after Tehran downplayed the incident and said it did not plan to retaliate.
“It was nothing but a big show, and so the markets deflated as quickly as they peaked,” said Tim Snyder, an economist at Matador Economics.
Investors had been closely watching Israel’s response to Iranian drone and missile attacks on April 13, which in turn were a response to a suspected Israeli airstrike on April 1 that destroyed a building on the grounds of the Iranian embassy in Damascus destroyed.
Meanwhile, US lawmakers added sanctions on Iranian oil exports to a pending aid package for Ukraine following Tehran’s attack on Israel last weekend.
Iran is the third largest oil producer in the Organization of the Petroleum Exporting Countries (OPEC), according to Reuters data.
The International Monetary Fund expects OPEC+ to start increasing oil production from July, media reported on Friday.
Remove ads
.
OPEC+ members, led by Saudi Arabia and Russia, agreed last month to extend voluntary production cuts of 2.2 million barrels per day (bpd) until the end of June. That has helped keep oil prices high.
As the oil risk premium has gradually declined, prices have fallen about 3% since Monday. Both benchmarks posted their biggest weekly losses since February.
However, investors do not rule out that tensions in the Middle East will disrupt supply.
Analysts at Goldman Sachs and Commerzbank (ETR:) raised their forecasts on Friday, taking into account geopolitical tensions and the prospect of rising demand and limited supply from OPEC and allies (OPEC+).
“Oil demand is growing at a healthy pace and supply should be tight due to the extension of OPEC+’s voluntary production cuts,” said UBS analyst Giovanni Staunovo.
U.S. energy companies added oil and rigs this week for the first time in five weeks, energy services firm Baker Hughes said in its closely watched report Friday.
The number of oil and gas platforms, an early indicator of future production, rose by two to 619 in the week to April 19.
Money managers cut their net long futures and options positions in the week to April 16, the US Commodity Futures Trading Commission (CFTC) said on Friday.
