In a significant market development, oil prices experienced a notable drop of over 2 percent on Friday, marking the most substantial weekly decline since early April. The decline is largely attributed to emerging reports of a potential deal between the United States and Iran, which could lead to an extension of the ceasefire and help ease shipping restrictions through the critical Strait of Hormuz.
Brent crude futures saw a decrease to approximately $92 per barrel, while U.S. West Texas Intermediate (WTI) crude fell below $88 per barrel. These benchmarks reached their lowest levels since mid-April, with Brent experiencing an 11 percent decrease for the week and WTI losing over 9 percent. The market’s reaction was driven by the possibility of a tentative understanding between Washington and Tehran aimed at reopening the Strait of Hormuz, a vital channel for global energy transport. Although Iranian media indicated that Tehran is in the final stages of reviewing the agreement, a definitive decision is yet to be confirmed.
The potential for increased oil flow through the Strait of Hormuz has alleviated some concerns over supply disruptions, which had previously driven up prices amid the ongoing conflict. Despite these developments, shipping traffic through the strait remains significantly below pre-conflict levels, contributing to continued uncertainty in the market. Analysts noted that traders are closely monitoring the situation, with many investors closing bullish positions as prices continue to decline. Nonetheless, some forecasts suggest that if shipping disruptions persist, oil prices could remain elevated over a longer period.
Meanwhile, market dynamics in Asia could shift as Saudi Arabia is anticipated to reduce its official selling prices for crude exports to the region for a second consecutive month. This move comes in response to weaker demand and a decrease in spot market premiums. Despite persistent supply concerns in the Middle East, demand from major Asian buyers has remained sluggish. Additionally, recent U.S. inventory data revealed declines in crude oil, gasoline, and distillate stockpiles, underscoring stronger domestic demand and an uptick in refinery activity.