Oil prices were little changed for the week as traders held on to hopes for a successful outcome from attempts to secure peace between the U.S. and Iran.
Brent futures were up 14 cents, or 0.19%, at $71.94 a barrel by 2:31 p.m. ET (1831 GMT), ending the week just 5 cents lower than last Friday's close. West Texas Intermediate was up 9 cents, or 0.13%, at $68.78 a barrel.
Trading was light as U.S. markets were closed ahead of the U.S. Independence Day holiday on Saturday. On Thursday, the two oil benchmarks had hit their lowest levels since before the U.S.-Israeli war with Iran began in late February.
Investor hopes for a full reopening of the Strait of Hormuz are being buoyed by peace talks between the U.S. and Iran, Commerzbank analysts said.
"The U.S.-Iran dealmaking process remains fragile but continues for now, as the question of Strait of Hormuz tolls and administration remains contentious," Citi analysts wrote.
"We expect the MoU (memorandum of understanding) to hold, not because trust has suddenly emerged, but because the incentives to break are poor for both sides," Citi analysts said.
Some shipping has resumed through the Strait of Hormuz, as called for under the initial U.S.-Iranian deal, but uncertainty is high after the two countries exchanged strikes last weekend following an Iranian attack on a cargo ship.
With the prospect of shipping more oil, Gulf producers are working to increase output. OPEC output in June rose by 3.3 million barrels per day month-on-month, according to a Reuters survey.
Kuwait's oil production rose sharply to 1.65 million bpd in June, from 580,000 bpd in May, a source close to the matter told Reuters on Thursday.
At least five supertankers carrying a total of 10 million barrels of Saudi oil have left the strait and Saudi Aramco has switched to spot pricing from longer-term contracts to speed sales in Asia, according to trade sources and shipping data.
"Overall, the recovery in Middle Eastern supply is outpacing our initial expectations while Chinese-depressed import demand remains weak," said Rory Johnston, founder of the Commodity Context newsletter.
As the availability of supplies grows, the market structure has turned from backwardation to contango, reflecting decreasing expectations of future shortages.
Brent crude for prompt delivery traded this week below contracts for delivery as far as six months into the future, the latest sign that increasing shipments through the strait have caused a near-term glut.
