On Friday, oil prices experienced a significant drop of more than 2 percent, marking the steepest weekly decline since early April. This downturn came as markets responded to reports suggesting a possible accord between the United States and Iran, which could potentially extend a ceasefire and alleviate shipping restrictions through the critical Strait of Hormuz.
As Brent crude futures decreased to approximately $92 per barrel and U.S. West Texas Intermediate (WTI) crude slipped below $88 per barrel, both benchmarks hit their lowest points since mid-April. Brent and WTI recorded a weekly decrease of about 11 percent and over 9 percent, respectively. The market’s reaction was primarily influenced by reports indicating that Washington and Tehran had reached a tentative understanding to prolong the ceasefire and facilitate the reopening of the Strait of Hormuz, an essential global energy passage. While Iranian media suggested that Tehran was in the final stages of reviewing the agreement, a conclusive decision had yet to be made.
The prospect of enhanced oil flow through the strait has mitigated worries about supply disruptions, which previously led to sharp price hikes amid the recent conflict. Nonetheless, uncertainties persist as the current shipping traffic through the strait remains significantly lower than pre-conflict levels. Analysts point out that traders are closely monitoring the developments regarding the potential U.S.-Iran deal, leading many investors to close bullish positions as prices continue their downward trend. Despite the recent price decline, forecasts indicate that oil prices could remain high if shipping disruptions persist for a prolonged period.
In related developments, Saudi Arabia is anticipated to reduce its official selling prices for crude exports to Asia for the second consecutive month. This decision reflects weaker demand and easing spot market premiums, as demand from major Asian buyers has remained subdued despite ongoing supply concerns in the Middle East. Meanwhile, recent U.S. inventory data has shown declines in crude oil, gasoline, and distillate stockpiles, indicative of stronger domestic demand and increased refinery activity.