Oil rises for second week amid geopolitical tensions

Oil prices extended gains on Friday and were headed for a second weekly gain, boosted by geopolitical tensions in Europe and the Middle East, concerns about supply shortages and optimism about rising global fuel demand as economies improve.

"Oil prices appear to have the potential to rise further in the near term as a more positive economic backdrop is accompanied by ongoing supply shortages and rising geopolitical risks," ANZ analysts Daniel Hynes and Soni Kumari said in a note as the bank raised its three-month forecast. Brent target price is $95 per barrel.

Brent and WTI are set to rise more than 4% this week, rising for a second week in a row as OPEC's third-largest producer Iran seeks revenge against Israel for an attack that killed senior Iranian military officials.

Israel did not claim responsibility for the attack on the Iranian embassy compound in Syria on Monday.

Ongoing Ukrainian drone attacks on oil refineries in Russia may have disrupted more than 15% of Russian capacity, a NATO official said on Thursday, crippling the country's fuel production.

The Organization of the Petroleum Exporting Countries (OPEC) and its allies led by Russia, known as OPEC+, this week kept their oil supply policies unchanged and demanded that some countries comply more strictly with production cuts.

"Further tightening of quota enforcement should lead to a further fall in output in the second quarter," ANZ analysts said.

"The prospect of a tighter market should lead to inventory drawdowns in the second quarter."

Global supplies of heavy crude also fell after Mexico and the United Arab Emirates cut exports of these grades.

This comes as global oil demand grew robustly by 1.4 million barrels per day (bpd) in the first quarter, JPMorgan analysts said in a note.

“Our high-frequency demand indicators show total oil consumption in March averaged 101.2 million bpd, 100,000 bpd above our published estimates,” they said.