Oil prices were headed for their biggest weekly drop since March 2023 on Friday, as the absence of significant supply disruptions from the Iran-Israel conflict caused the risk premium to evaporate.

Brent crude futures were up 35 cents, or 0.52%, at $68.08 a barrel by 0429 GMT while U.S. West Texas Intermediate crude was up 40 cents, or 0.61%, at $65.64. That left both contracts on track for weekly declines of about 12%.

The benchmarks are now back to levels before Israel started the conflict by firing missiles at Iranian military and nuclear targets on June 13. The week began with prices hitting a five-month high after the U.S. struck an Iranian nuclear site over the weekend, before slumping to their lowest in more than a week on Tuesday when U.S. President Donald Trump announced a ceasefire between Iran and Israel.

For now, traders and analysts say they don't see a material impact from the crisis on oil flows. "Without the threat of significant supply disruptions, we still see oil as fundamentally oversupplied, with our 2025 balance showing a surplus of around 2.1 million barrels per day (bpd)," Macquarie analysts wrote in a research note on Thursday.

Analysts expect WTI to average around $67 a barrel this year and $60 next year, raising each forecast by $2 after factoring in a geopolitical risk premium. The small gain in prices late in the week came as U.S. government data showed crude and fuel inventories rose a week earlier, with refining activity and demand picking up.

"The market is starting to digest the fact that crude inventories are suddenly very tight," said Phil Flynn, senior analyst at Price Futures Group. Also supporting prices was a Wall Street Journal report that Trump plans to pick the next Federal Reserve chief earlier than usual. That has fueled fresh bets on a U.S. interest rate cut that would normally boost oil demand. (alg)

Source: Reuters