Oil prices experienced a significant drop of over 2 percent on Friday, marking their steepest weekly decline since early April, as reports surfaced about a potential deal between the United States and Iran. This agreement could extend a ceasefire and ease shipping restrictions through the strategic Strait of Hormuz.
Brent crude futures fell to around $92 per barrel, while U.S. West Texas Intermediate (WTI) crude slipped below $88 per barrel. Both benchmarks reached their lowest points since mid-April, with Brent decreasing by approximately 11 percent for the week and WTI losing over 9 percent.
The market’s response was primarily influenced by claims that Washington and Tehran had tentatively agreed to prolong a ceasefire and reopen the Strait of Hormuz, a crucial global energy corridor. Iranian media indicated that Tehran was nearing the conclusion of its review of the proposed deal, though a final decision had yet to be reached.
The potential for enhanced oil flow through the strait alleviated concerns about supply disruptions, which had previously driven up prices amid ongoing conflicts. Nonetheless, uncertainty lingers as shipping traffic through the waterway remains significantly below pre-conflict levels. Analysts note that traders are keenly observing developments related to the U.S.-Iran agreement, with many investors opting to close bullish positions as prices continue to decline. Despite this downturn, some forecasts suggest that oil prices might stay elevated if shipping disruptions prolong.
Additionally, Saudi Arabia plans to reduce its official selling prices for crude exports to Asia for the second month in a row due to declining demand and easing spot market premiums. Demand from key buyers, particularly in Asia, remains sluggish despite persistent supply concerns in the Middle East. Recent U.S. inventory data revealed drops in crude oil, gasoline, and distillate stockpiles, signaling stronger domestic demand and increased refinery activity.