Oil prices experienced a notable decline of over 2 percent on Friday, marking the most significant weekly drop since early April. This downturn comes amid reports suggesting a potential agreement between the United States and Iran, which could prolong a ceasefire and ease shipping restrictions through the crucial Strait of Hormuz. Brent crude futures decreased to approximately $92 per barrel, while U.S. West Texas Intermediate (WTI) crude dipped below $88 per barrel, reaching their lowest points since mid-April. Over the week, Brent saw an 11 percent decrease, and WTI fell by more than 9 percent.
The market’s response has been heavily influenced by speculation of a tentative U.S.-Iran understanding aimed at extending a ceasefire and reopening the Strait of Hormuz, a vital artery for global energy transport. Reports from Iranian media indicate that Tehran is in the closing stages of reviewing this proposed deal, though a final decision has yet to be made. The potential for increased oil flows through the strait has alleviated some concerns over supply disruptions that had previously driven up prices during the ongoing conflict.
Despite this potential easing of tensions, uncertainty remains as the volume of shipping through the Strait of Hormuz remains significantly lower than pre-conflict levels. Analysts highlight that traders are closely monitoring developments regarding the possible U.S.-Iran deal, with many investors opting to close bullish positions in light of the continuing price decline. Nevertheless, forecasts suggest that if shipping disruptions persist, oil prices could stay elevated for a prolonged period.
In response to the evolving market conditions, Saudi Arabia is anticipated to lower its official selling prices for crude exports to Asia for the second month in a row. This adjustment reflects weaker demand and reduced spot market premiums, as major buyers, particularly in Asia, show subdued interest despite ongoing supply concerns in the Middle East. Concurrently, recent U.S. inventory reports reveal declines in crude oil, gasoline, and distillate stockpiles, indicative of stronger domestic demand and heightened refinery activity.