By: Economy Middle East

Oil prices rose on Friday ahead of the long U.S. holiday weekend, supported by cautious optimism surrounding ongoing efforts to ease tensions in the Middle East through diplomatic talks between the United States and Iran.

As of 5:40 GMT, Brent crude futures rose 45 cents, or 0.63 percent, to $72.25 a barrel, while U.S. West Texas Intermediate (WTI) crude gained 36 cents, or 0.52 percent, to trade at $69.05 a barrel.

Supply boost adds downward pressure on oil prices

In the previous trading session, oil prices dropped to their lowest levels since before the U.S.-Israeli conflict with Iran escalated in late February. On a weekly basis, Brent was up 0.35 percent, while WTI gained 0.43 percent, marking the smallest weekly changes for both benchmarks in several months.

Notably, U.S. financial markets will remain closed on Friday ahead of the Independence Day holiday, which falls on Saturday.

Meanwhile, shipping through the Strait of Hormuz has partially resumed in line with the initial agreement between Iran and the United States, following an exchange of strikes last weekend that came after Iran targeted a cargo vessel.

Oil-producing Gulf states are increasing output as shipping through the Strait of Hormuz resumes, following its reopening after the conflict. Before the outbreak of the war, the vital waterway handled roughly one-fifth of the world’s daily oil and liquefied natural gas supplies.

At least five supertankers carrying a combined 10 million barrels of Saudi crude have passed through the Strait of Hormuz. Saudi Aramco has also shifted to spot pricing to accelerate crude sales to Asian buyers, according to trade data.

The rise in supply has added downward pressure on oil prices, with the spread between front-month Brent crude and the one-month forward contract turning negative on June 24. The six-month Brent spread also slipped into negative territory on Thursday, signaling a contango market structure, in which futures prices trade above spot prices due to expectations of ample supply.

Brent to average $80 a barrel in H2 2026

UBS on Thursday lowered its Brent crude price forecasts, citing the U.S.-Iran memorandum of understanding and the resulting increase in oil shipments through the Strait of Hormuz.

The bank cut its average Brent price forecast for the September quarter by $25 a barrel and reduced its December quarter outlook by $10. It now expects Brent to average $80 a barrel in the second half of the year, before easing to $75 a barrel in 2027.

On the supply front, the latest data from the U.S. Energy Information Administration showed domestic crude output rose to a record 13.93 million barrels per day in April, adding to expectations of ample global oil supplies.

Investors are now awaiting further direction from an expected OPEC+ production increase for August and any new developments in U.S.-Iran negotiations.