Oil prices rose slightly in Asian trade on Friday and were sitting at an over two-month peak as optimism over increased summer demand and speculation over supply disruptions supported crude markets.
Crude prices were also headed for a fourth week of strong gains, amid expectations that oil markets will tighten further in the coming months. A drop in the dollar also aided oil prices this week, amid increased bets on U.S. interest rate cuts.
Brent oil futures expiring in September rose 0.1% to $87.55 a barrel, while West Texas Intermediate Crude futures rose 0.1% to $83.14 a barrel by 20:40 ET (00:40 GMT).
Trading volumes were muted on account of a U.S. market holiday on Thursday.
Oil heads for weekly gains amid demand optimism
Oil prices were trading up between 3% and 4% this week, having risen sharply amid increasing optimism that crude demand will pick up during the travel-heavy summer season.
U.S. travel demand in particular was a key source of this optimism, as analysts forecast record-high travel activity in the world's biggest fuel consumer through the independence day week.
Bets on stronger demand were furthered by data showing a massive drawdown in U.S. oil inventories over the past week, as fuel retailers prepared for holiday travel. This week is also expected to have seen sharp drawdowns in crude inventories.
"Market sentiment has been supported this week by strong mobility indicators and intensifying geopolitical tension in the Middle East," analysts at ANZ wrote in a note.
Persistent concerns over supply disruptions in the Middle East also saw traders attach a bigger risk premium to oil prices, as tensions between Israel and Lebanon's Hezbollah showed little signs of easing.
OPEC oversupply, weak economic readings cool oil gains
But whether oil prices will push further remained doubtful, especially as recent data showed members of the Organization of Petroleum Exporting Countries had increased production in recent months. Increased production pointed to less tight markets later this year.
Hawkish signals on U.S. interest rates from the Federal Reserve also factored into some market caution, while traders were on edge ahead of key nonfarm payrolls data due later in the day, which is set to provide more cues on the U.S. economy.
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