Oil prices were slightly higher on Friday as American traders adjusted their positions before the long Memorial Day weekend, a time when demand for travel and fuel tends to pick up. Brent crude settled at $64.78 a barrel, 34 cents higher. West Texas Intermediate (WTI) also advanced, rising 33 cents to settle at $61.53.
Much of the rise was related to short-covering ahead of the holiday. Analysts added that the beginning of the U.S. summer driving season usually lifts gasoline demand, offering firm support to oil prices at this stage of the year.
Meanwhile, markets were closely monitoring the ongoing nuclear talks between the United States and Iran. Discussions in Rome ended without being able to seal a final agreement. The talks focus on restraining Iran's nuclear program in return for sanctions relief — that could end up eventually pushing up Iran's oil exports. But the situation has stayed murky with little progress made.
The atmosphere is tense, and some officials have said if one hopes for diplomacy to fail, they would be open to considering military options. This takes us to the threat of potential Middle East supply disruptions, which serves as the latest risk to the oil market.
Meanwhile, the organization of oil-producing nations, known as OPEC+—members of the Organization of the Petroleum Exporting Countries as well as allies like Russia — is to meet next week. We expect the group to announce an additional increase of 411,000 barrels per day for July.
The prospective production increase is one step in a phased return to the cartel's cuts. OPEC+ has already added about one million barrels a day back to the market, starting in April. The group is targeting to unwind through to the end of October a 2.2 million bpd cut that the producers had made in voluntary output cuts, which was initially implemented to curb sliding prices amid economic downturns worldwide.
OPEC+ raising production could further pressure prices lower if demand fails to keep up. Meanwhile, a breakdown in nuclear negotiations may cause a jump in geopolitical risks and potentially curb any future oil supply from Iran.
