On Friday, oil prices saw a decline exceeding 2 percent and were on track for their most significant weekly drop since early April. This downturn was sparked by news of a possible agreement between the United States and Iran, which could prolong a ceasefire and potentially ease shipping restrictions through the Strait of Hormuz, a crucial passage for global energy transportation.
Brent crude futures decreased to roughly $92 per barrel, while U.S. West Texas Intermediate (WTI) fell under $88 per barrel. Both oil benchmarks reached their lowest points since mid-April, with Brent experiencing an 11 percent drop for the week and WTI falling over 9 percent. The market’s reaction was influenced by reports suggesting that Washington and Tehran had tentatively agreed to extend a ceasefire and reopen the Strait of Hormuz. Iranian media indicated that Tehran was nearing the completion of its review of the proposed deal, although a final decision was yet to be confirmed.
This potential development alleviated fears of supply disruptions that had previously driven up prices during the recent conflict. However, concerns persist as shipping activities through the strait remain below pre-conflict levels. Analysts noted that traders are keeping a close watch on the unfolding U.S.-Iran negotiations, prompting many investors to close positions that had bet on rising prices. Despite the current downturn, some forecasts maintain that oil prices could stay high if shipping disruptions continue for a prolonged period.
At the same time, Saudi Arabia is projected to reduce its official selling prices for crude exports to Asia for a second month in a row, responding to decreased demand and softening spot market premiums. Major buyers, especially in Asia, have shown lukewarm demand even amid ongoing supply uncertainties in the Middle East.
Additionally, recent U.S. inventory reports have revealed drops in crude oil, gasoline, and distillate stockpiles, indicating heightened domestic demand and intensified refinery operations. These factors further contribute to the complex dynamics currently influencing global oil markets.