Oil prices experienced a notable drop of over 2 percent on Friday, setting the stage for their steepest weekly decline since early April. This downturn came as markets absorbed news of a potential U.S.-Iran agreement aimed at extending a ceasefire and easing shipping restrictions through the pivotal Strait of Hormuz. Brent crude futures fell to approximately $92 per barrel, while U.S. West Texas Intermediate (WTI) crude dipped below $88 per barrel. Both benchmarks reached their lowest points since mid-April, with Brent and WTI down roughly 11 percent and over 9 percent for the week, respectively.
The market’s reaction was largely influenced by reports suggesting that Washington and Tehran had reached a preliminary understanding to prolong a ceasefire and reopen the Strait of Hormuz, a crucial artery for global energy transport. Iranian media indicated that the proposed agreement was under final review in Tehran, though it awaited a definitive decision. The potential for enhanced oil flow through the strait has alleviated some supply disruption concerns that had previously driven up prices during recent conflicts. However, uncertainties linger as shipping activity through the strait remains significantly below levels seen before the conflict.
Analysts noted that traders are closely monitoring developments related to the potential U.S.-Iran deal, with many investors opting to close bullish positions as prices continue to decrease. Although oil prices have recently fallen, projections suggest they could remain high if shipping disruptions extend over a prolonged period. Meanwhile, Saudi Arabia is anticipated to reduce its official selling prices for crude exports to Asia for the second consecutive month. This move comes amidst weakening demand and decreasing spot market premiums, with Asian demand remaining subdued despite ongoing supply concerns in the Middle East.
Additionally, recent U.S. inventory data revealed declines across crude oil, gasoline, and distillate stockpiles, hinting at stronger domestic demand and heightened refinery activity. As markets navigate through these developments, the focus remains on the potential implications of a U.S.-Iran accord and its impact on global oil supply dynamics.