Oil settles up on Middle East tensions, posts weekly loss

For the week, Brent declined 0.8%, while WTI fell more than 1%.

During the week, oil prices neared a six-month high on concern that Iran, the third-largest OPEC producer, might retaliate for a suspected Israeli warplane attack on Iran's embassy in Damascus on Monday.

"The market's main focus is on whether Iran will retaliate against Israel," said Andrew Lipow, president of Lipow Oil Associates, with the fear of disruption associated with the events in the Middle East supporting prices.

The U.S. expects an attack by Iran against Israel but one that would not be big enough to draw Washington into war, according to a U.S. official. Iranian sources said Tehran has signaled a response aimed at avoiding major escalation.

Supply chain issues still carry the biggest risk premium as Iran maintains its threat to shut the Suez Canal, said Tim Snyder, economist at Matador Economics.

The International Energy Agency cut its forecast for 2024 world oil demand growth to 1.2 million barrels per day (bpd).

OPEC on Thursday said world oil demand will rise by 2.25 million barrels per day (bpd) in 2024.

"For now the market is mostly in the OPEC 2.2 million bpd demand growth camp as opposed to the IEA's reduced 1.2 million bpd forecast," said Saxo Bank's Ole Hansen.

Friday's gains erased the previous session's losses, which were dominated by stubborn U.S. inflation that dampened hopes for an interest rate cut as early as June.

Higher interest rates can weaken economic growth and depress oil demand.

U.S. energy firms this week cut the number of oil rigs operating for a fourth week in a row, energy services firm Baker Hughes said in its closely followed report.

The oil and gas rig count, an early indicator of future output, fell by three to 617 in the week to April 12, the lowest since November.

Money managers raised their net long U.S. crude futures and options positions in the week to April 9, the U.S. Commodity Futures Trading Commission (CFTC) said.