By: Economy Middle East

Oil prices rose on Friday after recording sharp losses in the previous session, as expectations for a near-term end to the U.S.-Israeli conflict with Iran weakened following Hezbollah’s rejection of a new ceasefire proposal in Lebanon.

As of 4:11 GMT, Brent crude futures edged up 39 cents, or 0.41 percent, to $95.42 a barrel, after closing 2.84 percent lower in the previous session. Meanwhile, U.S. West Texas Intermediate (WTI) crude gained 11 cents, or 0.12 percent, to $93.15 a barrel, after falling 3.1 percent in the previous session.

Oil prices set for first weekly gain in three weeks

Despite recent declines, oil prices remained on track to record their first weekly gains in three weeks. WTI has risen more than 6 percent this week, while Brent has gained 3.57 percent, supported by renewed tensions in the Middle East as efforts to secure a peace agreement between the U.S. and Iran continue to stall.

Concerns over restricted shipping through the Strait of Hormuz, a critical route that carries roughly one-fifth of global oil supplies, have also underpinned prices. Analysts have also pointed to declining global oil inventories as a factor that could drive prices higher in the third quarter.

“Oil, which had gained 10 percent over the first three trading sessions of the week, stalled after Isreal and Lebanon negotiated a ceasefire contingent upon a complete halt of strikes from Iran. Meanwhile, the U.S. and Iran have also established a framework to extend the ceasefire and reopen the Strait of Hormuz. However, the negotiations keep hitting a wall and fights keep breaking out between the countries every now and then,” said Vijay Valecha, Chief Investment Officer, Century Financial.

On Thursday, Hezbollah leader Naim Qassem rejected a U.S.-mediated proposal aimed at ending hostilities between Israel and Lebanon. Iran has also linked any potential peace agreement with Washington to the establishment of a ceasefire in Lebanon.

U.S. President Donald Trump said on Thursday that he believed progress was being made between Israel and Lebanon, adding that Lebanon deserved peace.

Global oil demand to grow 1.2 million barrels per day this year

Meanwhile, the Organization of the Petroleum Exporting Countries maintained its forecast for global oil demand growth of 1.2 million barrels per day this year. OPEC Secretary-General Haitham Al Ghais said the outlook remained unchanged despite the conflict in the Middle East and the closure of the Strait of Hormuz.

“The IEA now projects a global supply shortfall of roughly 1.8 million barrels per day, while the EIA expects inventories to draw by an even steeper 2.6 million barrels per day, highlighting a significantly tighter oil market,” added Valecha

At the same time, Iranian oil exports have dropped to their lowest level in six years, largely due to a U.S. naval blockade, according to shipping data. However, subdued demand from China has also weighed on prices for Iranian crude.

“The last two weeks saw oil prices declining amid hopes of a lasting peace deal. However, oil is up over 3 percent so far this week as risks are skewed to the upside, while tanker traffic through the Strait remains well below pre-war levels,” added Valecha.