Oil prices on Friday pulled back from 3 ½-year highs, but marked a second weekly climb in a row, driven by uncertainty over how much oil the global market will lose following the U.S. decision to reimpose sanctions on OPEC member Iran.
On the New York Mercantile Exchange, June West Texas Intermediate crude oilCLM8, -1.19% fell 66 cents, or 0.9%, to settle at $70.70 a barrel, after closing at $71.36 Thursday—the highest since November 2014. The contract logged a roughly 1.4% weekly climb.
July Brent crude LCON8, -0.37% the global benchmark, lost 35 cents, or nearly 0.5%, to $77.12 a barrel on ICE Futures Europe, after notching modest gains Thursday. For the week, the contract climbed about 3%. The recent surge in futures this week has prompted renewed oil-market hopes from bulls that Brent crude could again reach $100 a barrel—— a level not seen since before the price crash of late 2014.
Bank of America Merrill Lynch on Thursday predicted a Brent price target of $90 a barrel by the second quarter of 2019, while noting a “risk of $100 a barrel” oil next year. “Although, we are concerned these market dynamics could unfold over a shorter time frame,” the analysts wrote in a note.
Trump’s move Tuesday to abandon the 2015 international agreement to curb Iran’s nuclear program paved the way for the reimposition of U.S. economic sanctions on the Islamic Republic. The expectation that sanctions will again frustrate Iran’s oil industry and limit global supply has helped to provide support to oil.
In the past, sanctions against Iran have cut the country’s crude exports by around 1 million barrels a day. But because the European Union and other intentional players have decided to stick with the deal, U.S. sanctions are likely to affect only up to around 350,000 barrels a day, once reinstated within six months’ time, according to analysts at MUFG Bank.
Meanwhile, analysts at Commerzbank said Friday current crude-price levels indicated the Organization of the Petroleum Exporting Countries was now “regaining the price power it had lost” in the wake of the first U.S. shale boom that led to the price drop over three years ago.
“A large part of the price slide, which saw [Brent] plunge from over $100 to below $30 a barrel as a result of the price war between OPEC and the U.S. shale oil industry that began in autumn 2014, has now been reversed,” the analysts wrote in a note.
OPEC’s efforts to rein in a supply glut through production curbs helped boost prices by more than 50% last year. The cartel—led by Saudi Arabia—and 10 outside producers, including Russia, have been holding back crude output by around 1.8 million barrels a day since the start of 2017. The agreement is set to expire at the end of this year.
However, Saudi Arabia—the de facto head of OPEC—signaled this week that it could up its own production to make up for lost barrels from Iran.
“OPEC members and Russia may put more oil on the market to counter the loss” of Iranian oil, said James Williams, energy economist at WTRG Economics. There is also the increased “probability that OPEC will raise quotas at the June meeting.”
Oil market participants Friday also saw further signs of ongoing growth in U.S. crude production. Baker Hughes BHGE, -1.16% reported that the number of active U.S. rigs drilling for oil rose for a sixth week in a row, by 10 to 844 this week.
With oil prices at these levels, it “makes more sense for the U.S. to ramp up production,” said Scott Gecas, senior strategic account executive at Long Leaf Trading Group.
Among refined products, June gasoline RBM8, -0.36% settled nearly flat at $2.189 a gallon, but saw a weekly climb of 3.5%. June heating oil HOM8, -0.04% also ended little changed at $2.222 a gallon, for a rise of 3.2% on the week.
June natural gas NGM18, +0.18% fell nearly 0.3% to $2.806 per million British thermal units, still settling about 3.5% higher for the week.
— Barbara Kollmeyer contributed to this article