In a significant downturn, oil prices dropped over 2 percent on Friday, marking their steepest weekly fall since early April. This decline is largely attributed to emerging reports of a possible agreement between the United States and Iran, which may lead to an extension of a ceasefire and the easing of shipping restrictions through the Strait of Hormuz.
Brent crude futures saw a decrease to approximately $92 per barrel, while the U.S. West Texas Intermediate (WTI) crude slipped below $88 per barrel. Both benchmarks experienced their lowest values since mid-April, with Brent falling around 11 percent throughout the week and WTI dropping over 9 percent.
The market’s response was influenced by news that Washington and Tehran might have reached a preliminary understanding to prolong a ceasefire and potentially reopen the Strait of Hormuz, a crucial passageway for global energy. Iranian sources indicated that the government was close to completing its review of the proposed arrangement, although a definitive conclusion had not yet been reached.
The potential for smoother oil shipments through the Strait has alleviated concerns over supply interruptions that previously led to sharp price hikes amid the conflict. Nonetheless, shipping activity in the area has yet to return to its pre-conflict levels, leaving some uncertainties. Analysts noted that traders are closely monitoring the situation regarding the potential U.S.-Iran pact, with many investors choosing to liquidate bullish positions as prices continue to fall. Yet, projections suggest that if disruptions persist, oil prices might remain high over a prolonged period.
Concurrently, Saudi Arabia is anticipated to reduce its official selling prices for crude exports to Asia for the second month in a row, spurred by diminishing demand and declining spot market premiums. Despite the ongoing regional supply issues, demand from significant Asian purchasers has been tepid. Furthermore, recent U.S. inventory reports have revealed decreases in crude oil, gasoline, and distillate stockpiles, which point to robust domestic demand and increased refinery operations.