SINGAPORE: Crude oil futures inched higher on Friday, supported by a surprise drop in U.S. oil inventories and simmering Middle East tensions, but prices were headed for their biggest weekly loss in more than a month on worries of lower demand.

Brent crude futures rose 16 cents, or 0.2%, to $74.61 a barrel by 0025 GMT while U.S. West Texas Intermediate crude was at $70.84 a barrel, up 17 cents, or 0.2%.

Both contracts settled higher on Thursday for the first time in five sessions after data from the Energy Information Administration (EIA) showed that U.S. crude oil, gasoline and distillate inventories fell last week.

However, U.S. crude production hit a record high of 13.5 million barrels per day last week, EIA data showed, adding to concerns about rising supply as Libyan output resumes and as the Organization of the Petroleum Exporting Countries (OPEC) and their allies, a group known as OPEC+, planned to further unwind production cuts in 2025.

Brent and WTI are set to fall about 6% this week, their biggest weekly decline since Sept. 2, after OPEC and the International Energy Agency cut their forecasts for global oil demand in 2024 and 2025 and as concerns eased about a potential retaliatory attack by Israel on Iran that could disrupt Tehran’s oil exports.

“Speculative positioning across the ICE Brent complex strengthened from historically low levels, on heightened geopolitical risk of a potential Israeli strike on Iran’s oil infrastructure,” Citi analysts said in a note.

“While markets appear to have focused on reports that the U.S. urged Israel not to target oil infrastructure, driving the latest price easing, these risks remain high as rhetoric remains heated,” they added.

Citi expects global oil demand to slow to 900,000 bpd in 2025 from 1 million bpd this year on an economic slowdown and as more electric vehicles hit the road.

The “potential impact of China’s emerging economic stimulus plans on oil demand is uncertain, and more robust support may only result in a limited boost,” it added.