Oil prices edged higher in early European trading on Friday but remained firmly on course for their most severe weekly rout ever, as markets rapidly shed the risk premium that had driven prices above $80 per barrel during the recent Iran-Israel conflict.
Brent crude futures, the international benchmark, climbed 54 cents to $68.26 per barrel by 0830 GMT, while U.S. West Texas Intermediate gained 60 cents to $65.83. Despite Friday’s modest recovery, both contracts were tracking toward weekly losses of approximately 12 percent.
The dramatic price swings underscore how quickly oil markets can pivot from crisis mode back to fundamental supply-and-demand calculations. When Israel launched strikes on Iranian nuclear facilities on June 13, sparking a 12-day conflict, Brent briefly surged past $80 as traders priced in potential supply disruptions from the world’s oil-rich Middle East. However, those fears proved largely unfounded.
The turning point came when President Donald Trump announced a ceasefire agreement, sending prices tumbling to $67 per barrel as the market’s geopolitical risk premium rapidly unwound.
“The market has almost entirely shrugged off the geopolitical risk premiums from almost a week ago as we return to a fundamentals-driven market,” explained Janiv Shah, an analyst at energy consultancy Rystad Energy.
Now, attention is shifting back to traditional market drivers, with all eyes on the upcoming OPEC+ meeting scheduled for July 6. The producer alliance, which includes OPEC members and allies like Russia, will decide on August production levels amid ongoing questions about global demand strength.
Shah noted that while current market balances might support “one more month of accelerated unwinding,” the critical factor will be “how strong the summer demand indicators are showing up to be” during the peak driving season.
Supporting Friday’s price gains were encouraging inventory data from multiple regions. Tamas Varga, an analyst at PVM Oil Associates, pointed to “strong draws in the middle distillates” across several key storage hubs.
U.S. Energy Information Administration data released Wednesday showed declining crude oil and fuel inventories from the previous week, accompanied by rising refining activity and demand. The bullish inventory picture extended globally, with independently held gasoil stocks at Europe’s Amsterdam-Rotterdam-Antwerp hub falling to their lowest levels in over a year, while Singapore’s middle distillate inventories also declined as net exports increased.
Adding another layer to the supply picture, China’s Iranian oil imports surged in June as Beijing accelerated shipments ahead of the conflict. According to ship-tracking firm Vortexa, China—the world’s largest oil importer and biggest buyer of Iranian crude—purchased more than 1.8 million barrels per day of Iranian oil from June 1-20, marking a record high in the firm’s data.
The spike in Chinese purchases reflects both anticipatory buying before the conflict and improved demand from the country’s independent refineries, analysts noted.
As markets head into the weekend, traders will be parsing these competing signals: supportive inventory draws and robust Asian demand against the backdrop of fading geopolitical premiums and uncertainty about OPEC+ production policy in the coming months.
WHAT YOU SHOULD KNOW
Oil prices rose modestly Friday but are heading for their worst week since March 2023, falling 12% as markets quickly shed the geopolitical risk premium from the Iran-Israel conflict.
With the ceasefire in place, traders are now focused on fundamentals, particularly the July 6 OPEC+ meeting and summer demand strength. While supportive inventory data and record Chinese imports of Iranian crude provide some price support, the rapid evaporation of the conflict premium demonstrates how quickly oil markets can shift from crisis-driven to fundamentals-driven pricing.
