Oil prices saw a significant drop of over 2 percent on Friday, poised to mark their steepest weekly decline since early April. This downturn comes amid reports suggesting a possible agreement between the United States and Iran, which could lead to an extended ceasefire and alleviate shipping constraints through the Strait of Hormuz.
In the trading markets, Brent crude futures tumbled to approximately $92 per barrel, while U.S. West Texas Intermediate (WTI) crude slipped below $88 per barrel. These figures represent the lowest levels for both benchmarks since mid-April, with Brent witnessing an 11 percent decrease over the week and WTI experiencing a decline exceeding 9 percent.
The market’s reaction was fueled by news of a tentative understanding between Washington and Tehran to extend the ceasefire and potentially reopen the strategically crucial Strait of Hormuz. According to Iranian media, Tehran is in the final phase of assessing the proposed agreement, though a definitive decision has not yet been reached. The prospect of enhanced oil flow through the strait has mitigated concerns about supply disruptions that previously caused steep price hikes during the recent conflict. Nevertheless, uncertainty lingers as shipping activity through this vital waterway remains below pre-conflict levels.
Analysts note that traders are keeping a close watch on the developments regarding the potential U.S.-Iran deal, leading many investors to close bullish positions as oil prices continue their descent. Despite the recent downturn, some projections indicate that oil prices could stay elevated if disruptions in shipping persist over a longer period.
Separately, Saudi Arabia is anticipated to reduce its official selling prices for crude exports to Asia for the second consecutive month due to softer demand and diminishing spot market premiums. Even though supply concerns persist in the Middle East, demand from major buyers, especially in Asia, has remained tepid. In the U.S., recent inventory reports have revealed declines in crude oil, gasoline, and distillate stockpiles, indicating stronger domestic demand and an increase in refinery operations.