Oil Set for Largest Weekly Decline in Two Years as Risks Abate

Even though there was an increase in oil prices on Friday, they were destined for a significant decline for the first time since March 2023. This was due to the Iran-Israel conflict not resulting in any large supply cuts. Any additional costs of risk were gone. Brent crude increased by 42 cents, or 0.6 percent, reaching $68.15, while US oil went up by 51 cents, or almost 0.8 percent, sitting at $65.75. At the beginning of what became a twelve-day war on June 13, following Israel's strike on Iranian nuke sites, Brent prices initially soared above $80 per barrel only to crash post-Trump's claim that hostilities had paused to $67 later in the month.

This indicates that both Brent and WTI were likely to drop by around 12% towards the end of the week. "The market has nearly forgotten the extra cost from the risk a week back as it moved back to a normal-driven market," commented Janiv Shah from Rystad Energy.

Shah added that market participants were following OPEC+'s scheduled meetings, anticipating a production increase while monitoring summer demand indicators along with expected construction near the July 6th session scheduled for output boost prediction set at 411k barrels daily rise for the season, bolstering peak demand.

According to an analyst at PVM Oil Associates, Tamas Varga, oil costs rose as many oil stock reports indicated significant declines in major oil products. The U.S. Energy Information Group stated that inventory levels of fuel and oil had decreased the previous week. This was accompanied by an increase in manufacturing and demand for oil. ARA hub gas oil stocks were reported at a year low, which was later confirmed by other data sources. Simultaneously, Singapore's mid-range petroleum stock saw a weekly surge in net exports week on week. Furthermore, experts stated that China's purchases of Iranian oil surged in June along with pre-flight shipping increases and solo offshore supplier demands increasing.

Top global oil buyer China averaged over 1.8 million barrels per day in imports from Iran, which increased between June 1 and June 20, making China's purchase rate a record high, said Vortexa ship trackers.