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Iran responded to a U.S. drone strike that killed a top Iranian
general on Jan. 3 with a missile attack on Iraqi air bases
hosting U.S. forces that left no casualties. But a Revolutionary
Guards commander said Iran would take "harsher revenge" soon.
"Hostilities may have ended for the time being, but the
longer-term risks of conflict have by no means vanished," said
Stephen Brennock of oil broker PVM.
"Set against this backdrop, the threat of supply disruptions in
the Middle East is very much alive."
Brent crude <LCOc1>, the global benchmark, was up 24 cents at
$65.61 by 1155 GMT, and was heading for its first weekly decline
in six weeks, down over 4%. U.S. West Texas Intermediate crude
<CLc1> added 11 cents to $59.67.
Brent is still below where it was before the U.S. drone strike
killed Iranian general Qassem Soleimani on Jan. 3.
"There has been some de-escalation, but the return of risk is
still there," said Olivier Jakob, oil analyst at Petromatrix.
"The closing hours of Friday are traditionally filled by
short-covering due to the impossibility to react during the
weekend."
Still, there has been no disruption to Middle East production as
a result of the flare-up in tensions and other indications this
week suggest supply is ample.
Crude inventories in the United States rose last week by 1.2
million barrels, the U.S. Energy Information Administration said
on Wednesday.
That compared with analysts' expectations in a Reuters poll for
a 3.6 million-barrel drop.
"There's too much supply out there," a Japan-based based oil
executive told Reuters.
In a bid to tackle any build-up of excess supply, the
Organization of the Petroleum Exporting Countries plus allies
including Russia are embarking on a further cut in production as
of Jan. 1 this year.
Industry surveys, including from Reuters, showed that OPEC
output declined in December ahead of the new pact. Still,
production remains higher than the forecast demand for early
2020, according to some analysts. [OPEC/O]
"The oversupply on the oil market is sizeable," said Carsten
Fritsch, analyst at Commerzbank.
(Reporting by Alex Lawler; Additional reporting by Aaron
Sheldrick; Editing by Jan Harvey and Mark Potter)
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