Oil prices experienced a notable decline of more than 2 percent on Friday, marking their steepest weekly drop since the beginning of April. This downturn was influenced by emerging reports suggesting that the United States and Iran might be nearing a consensus to prolong a ceasefire and alleviate shipping constraints through the Strait of Hormuz.
The price of Brent crude futures dipped to around $92 per barrel, while the U.S. West Texas Intermediate (WTI) crude fell below $88 per barrel. These values represent the lowest levels for both benchmarks since mid-April, with Brent decreasing by approximately 11 percent over the week and WTI losing more than 9 percent.
The market’s response was largely shaped by claims of a tentative agreement between Washington and Tehran aimed at extending a ceasefire and potentially reopening the Strait of Hormuz, a crucial artery for global energy transport. Iranian news outlets indicated that Tehran was in the final stages of evaluating the proposed deal, although no definitive decision had been reached.
The anticipation of improved oil traffic through this vital channel has alleviated some concerns about supply disruptions, which had previously driven significant price surges during the ongoing conflict. However, skepticism remains as vessel movements in the strait have yet to return to pre-conflict volumes.
Traders are closely monitoring the developments of the possible U.S.-Iran accord, with many opting to close their bullish positions as oil prices continue their descent. Despite this recent drop, some analysts predict that prices could stay high if shipping disruptions linger. In the backdrop, Saudi Arabia is poised to reduce its official selling prices for crude exports to Asia for the second month in a row, responding to diminished demand and easing spot market premiums. Meanwhile, U.S. inventory reports have shown decreases in crude oil, gasoline, and distillate stockpiles, reflecting heightened domestic consumption and refinery operations.