On Friday, oil prices experienced a drop of more than 2 percent, heading towards their steepest weekly fall since early April. This downturn was spurred by reports of a potential agreement between the United States and Iran that could prolong a ceasefire and ease shipping restrictions through the strategically crucial Strait of Hormuz.
Brent crude futures fell to approximately $92 per barrel, while U.S. West Texas Intermediate (WTI) crude slipped below $88 per barrel. Both benchmarks hit their lowest points since mid-April, with Brent down about 11 percent over the week and WTI losing more than 9 percent. The market’s reaction was influenced by news that Washington and Tehran might have reached a tentative understanding to extend the ceasefire and reopen the Strait of Hormuz, a vital global energy corridor. Iranian media indicated that the proposal was in the final stages of review by Tehran, though no conclusive decision had been made yet.
The potential for improved oil flows through the Strait of Hormuz has allayed some fears regarding supply disruptions that had previously driven sharp price hikes amid recent conflicts. Despite this development, uncertainty still looms as shipping activity through the strait remains significantly below levels seen before the conflict. Analysts note that traders are closely monitoring the progress of the potential U.S.-Iran deal, with many investors opting to close bullish positions as prices continue to fall. Even with the recent price decline, some forecasts suggest that prices might stay high if shipping disruptions persist over a prolonged period.
In the meantime, Saudi Arabia is expected to reduce its official selling prices for crude exports to Asia for the second consecutive month, amid weakening demand and decreasing spot market premiums. Demand from major buyers, particularly in Asia, remains sluggish despite ongoing concerns about supply from the Middle East. Additionally, recent U.S. inventory data revealed declines in stockpiles of crude oil, gasoline, and distillates, reflecting stronger domestic demand and increased refinery activity.
