Oil markets experienced a significant downturn on Friday, with prices dropping more than 2 percent, marking the steepest weekly decline since early April. This comes as reports emerged about a potential agreement between the United States and Iran, aimed at prolonging a ceasefire and reducing shipping restrictions through the crucial Strait of Hormuz.
Brent crude futures fell to approximately $92 per barrel, while U.S. West Texas Intermediate (WTI) crude dipped below $88 per barrel. Both benchmarks saw their lowest levels since mid-April, with Brent and WTI recording a weekly loss of around 11 percent and over 9 percent respectively. The market’s reaction was largely influenced by hints of progress in negotiations between Washington and Tehran, which could lead to the reopening of the vital maritime route.
Reports from Iranian media suggest that Tehran is in the last stages of evaluating the proposed agreement, although a final decision has yet to be reached. The potential for improved oil flow through the Strait of Hormuz has alleviated some fears of supply disruptions that previously drove prices up during the conflict. Nonetheless, uncertainty lingers as shipping activity in the strait remains significantly below levels seen before the tensions escalated.
Analysts highlight that traders are closely monitoring developments regarding the U.S.-Iran talks, with many investors opting to close bullish positions amid the ongoing price retreat. Despite the current downturn, projections indicate that oil prices could remain high if shipping challenges persist unaddressed over a prolonged period. Concurrently, Saudi Arabia is anticipated to reduce its official selling prices for crude exports to Asian markets for the second month in a row, reflecting diminished demand and decreasing spot market premiums.
In addition, recent data from the U.S. shows declines in crude oil, gasoline, and distillate stockpiles. This reduction suggests stronger domestic demand alongside increased refinery activity, even as major buyers, particularly in Asia, continue to exhibit subdued demand despite the ongoing supply issues in the Middle East.