Oil prices experienced a significant drop of over 2 percent on Friday, poised to record their steepest weekly decline since early April. This movement in the markets comes amid emerging reports of a potential deal between the United States and Iran that could prolong a ceasefire and potentially ease shipping restrictions through the critical Strait of Hormuz.
Brent crude futures fell to roughly $92 per barrel, while U.S. West Texas Intermediate (WTI) crude dipped below $88 per barrel. This marks the lowest levels for both benchmarks since mid-April, with Brent seeing an approximate 11 percent decrease over the week and WTI losing over 9 percent. The market’s reaction was significantly influenced by the anticipation of an agreement between Washington and Tehran to extend a ceasefire, which may lead to reopening the Strait of Hormuz, a major artery for global energy shipments. Iranian media suggested that Tehran is in the final phase of reviewing the proposed agreement, though no definitive decision has been reached yet.
The potential for increased oil movement through the strait has alleviated some concerns about supply disruptions, which previously drove sharp price increases during the ongoing conflict. Nevertheless, uncertainties continue as the shipping traffic through this strategic waterway remains significantly below the levels observed before the conflict began. Analysts indicate that traders are closely monitoring the developments of a possible U.S.-Iran deal, with many investors opting to close bullish positions amid the current price retreat. Despite the recent downturn, some forecasts maintain that oil prices could stay high if shipping disruptions continue over a prolonged period.
Additionally, Saudi Arabia is anticipated to reduce its official selling prices for crude exports to Asia for the second month in a row, influenced by weaker demand and easing spot market premiums. Demand from key buyers, especially those in Asia, has remained subdued despite persistent supply issues in the Middle East. Meanwhile, recent data on U.S. inventories revealed declines in crude oil, gasoline, and distillate stockpiles, indicating stronger domestic demand and increased refinery activity.