On Friday, oil prices tumbled by over 2 percent, marking their most significant weekly drop since early April. This decline comes amid reports suggesting a potential U.S.-Iran agreement that could prolong a ceasefire and ease restrictions on shipping through the Strait of Hormuz, a crucial passage for global energy supplies.
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 experiencing an 11 percent decrease for the week and WTI losing more than 9 percent. Market dynamics were influenced by news that Washington and Tehran might have reached a preliminary understanding to extend a ceasefire, potentially facilitating the reopening of the Strait of Hormuz. While Iranian media indicated that the proposal was under final review in Tehran, a conclusive decision had yet to be announced.
The prospect of enhanced oil flows through the strait eased fears of supply disruptions, which had previously driven significant price hikes during the ongoing conflict. Nevertheless, uncertainties linger, as shipping traffic through the strategic waterway remains considerably below pre-conflict levels. Analysts noted that traders are closely monitoring developments related to the prospective U.S.-Iran deal, with many investors opting to close bullish positions as prices continue to decline. Despite the recent drop, some predictions suggest that oil prices could stay elevated if shipping disruptions persist 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, reflecting weaker demand and diminishing spot market premiums. Demand from major buyers, especially in Asia, has stayed lackluster despite ongoing supply concerns in the Middle East. In parallel, recent U.S. inventory data revealed declines in crude oil, gasoline, and distillate stockpiles, highlighting stronger domestic demand and increased refinery activity.
