Oil prices surged approximately 2% on Friday as global markets grappled with mounting supply concerns stemming from geopolitical tensions in major oil-producing regions. The rally came amid intensifying civil unrest in Iran and escalating military actions in the Russia-Ukraine conflict, prompting traders to reassess supply security.

Price Performance and Market Movement

Crude oil benchmarks posted significant gains across the board, building on Thursday's strong performance.

Both benchmarks had climbed more than 3% on Thursday, following two consecutive days of declines. The weekly performance reflects growing market anxiety over potential supply disruptions.

Iran Protests Drive Supply Concerns

Civil unrest in Iran emerged as a primary catalyst for oil price gains, with analysts expressing growing concern over potential production disruptions. Phil Flynn, senior analyst with the Price Futures Group, noted that "the uprising in Iran is keeping the market on edge."

The protests have spread across multiple Iranian cities, including:

• Capital city Tehran
• Major commercial center Mashhad
• Historic city of Isfahan
• Various other regions nationwide

A nationwide internet blackout was reported on Thursday as demonstrations over economic hardships continued to intensify. Ole Hansen, head of commodity analysis at Saxo Bank, observed that "Iran protests seem to be gathering momentum, leading the market to worry about disruptions."

OPEC Production and Regional Developments

Recent production data revealed declining output from key OPEC members. The Organization of the Petroleum Exporting Countries pumped 28.40 million barrels per day last month, representing a decrease of 100,000 bpd from November's revised total. Iran and Venezuela posted the largest production declines among member nations.

Russia-Ukraine Conflict Escalation

Concerns about supply disruptions intensified following escalated military actions in the Russia-Ukraine conflict. The Russian military confirmed firing its hypersonic Oreshnik missile at Ukrainian targets on Friday, specifically targeting energy infrastructure supporting Ukraine's military-industrial complex according to the Russian defense ministry.

Venezuelan Oil Deals in Focus

The White House scheduled meetings with oil companies and trading houses Friday afternoon to discuss Venezuelan export arrangements. Following Washington's capture of Venezuelan leader Nicolas Maduro on Saturday, President Trump has demanded full U.S. access to Venezuela's oil sector.

Tina Teng, market strategist at Moomoo ANZ, indicated that "the market will focus on the outcome in the coming days for how the Venezuelan oil in storage will be sold and delivered."

Market Outlook and Production Indicators

Despite supply concerns, analysts noted that global oil inventories continue rising, with oversupply remaining a key factor that could limit price gains. Haitong Futures suggested that unless risks around Iran escalate further, the current rebound may prove limited and difficult to sustain.

U.S. drilling activity showed continued decline, with the oil and gas rig count falling by two to 544 this week according to Baker Hughes. This represents the lowest level since mid-December and serves as an early indicator of future domestic output trends.

Oil prices extended their gains as markets assessed the geopolitical implications of US President Donald Trump's threats against Iran and strategic developments in Venezuela's energy sector. The commodity rally reflects growing investor attention to potential supply disruptions and policy changes affecting global oil flows.

Price Movement and Market Dynamics

Crude oil benchmarks posted solid gains during the trading session. The following table shows the key price movements:

Oil futures are heading for a weekly advance following Thursday's rally, which marked the biggest daily increase since October. However, analysts expect a significant surplus this year to create downward pressure on prices in the coming months.

Geopolitical Tensions Drive Market Sentiment

Trump's threat to hit Iran "hard" if the country's government killed protesters during the current period of unrest has added a risk premium to oil prices. The market continues to gauge the potential impact of US actions against Iran on global oil supply chains.

Meanwhile, Goldman Sachs Group Inc. reported that its clients are the most bearish on oil in 10 years, highlighting the mixed sentiment in the market despite recent gains.

Venezuela Energy Sector Developments

Investors are closely monitoring US moves regarding Venezuela following the ouster of President Nicolás Maduro. A high-level meeting is scheduled at the White House on Friday, where nearly 20 oil executives will discuss rebuilding the country's energy sector.

Chevron, currently the only American major permitted by Washington to operate in Venezuela, is loading tankers with Venezuelan crude at the fastest pace in seven months. These cargoes are primarily destined for US refiner Phillips 66.

Trading Activity and Market Flows

Trading houses Trafigura Group and Vitol Group are actively engaging with US refiners to assess interest in purchasing Venezuelan oil. Both companies have obtained preliminary US Treasury licenses to sell these barrels, indicating potential shifts in global oil trade patterns.

The Trump administration's measures could redirect more Venezuelan oil flows to American processors at the expense of Chinese buyers. Chinese refiners, who have been the largest purchasers of heavily discounted Venezuelan crude following US sanctions, are now exploring alternative supply options, including more expensive Canadian crude.

Technical Factors Supporting Prices

Beyond geopolitical developments, technical factors are contributing to oil's bullish momentum. Citigroup Inc. expects the annual period of commodity index rebalancing to drive additional cash flows into oil markets, providing fundamental support for prices.

The combination of geopolitical risk premiums, potential supply chain disruptions, and technical buying interest has created a supportive environment for oil prices, despite longer-term concerns about market oversupply.