Oil prices experienced a significant drop of over 2 percent on Friday, marking their steepest weekly decline since early April. This downturn comes amid reports of a possible agreement between the United States and Iran that could lead to an extended ceasefire and ease restrictions on the vital Strait of Hormuz shipping route.
Brent crude futures fell 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 decreasing about 11 percent over the week and WTI seeing a decline of more than 9 percent.
The market’s response was influenced by reports suggesting that Washington and Tehran had reached a preliminary understanding to prolong a ceasefire and potentially reopen the Strait of Hormuz, a crucial path for global energy supplies. Iranian media indicated that Tehran is in the final stages of considering the agreement, although no definitive decision has been announced yet.
The potential for increased oil flow through the strait has eased some concerns about supply disruptions, which had previously pushed prices higher during the conflict. Nonetheless, uncertainty lingers as the current shipping traffic through the waterway remains below pre-conflict levels. Analysts note that traders are closely monitoring the developments of the U.S.-Iran deal, with many investors unwinding bullish positions as prices decline. Despite the decrease, some forecasts suggest that oil prices might stay high if shipping disruptions persist.
In addition to the geopolitical developments, Saudi Arabia is anticipated to reduce its official selling prices for crude exports to Asia for the second month in a row due to weaker demand and declining spot market premiums. Demand from major Asian buyers has stayed tepid despite ongoing supply concerns in the Middle East. Meanwhile, recent U.S. inventory data revealed declines in crude oil, gasoline, and distillate stockpiles, indicating stronger domestic demand and increased refinery activity.