Oil prices experienced a significant drop of over 2% on Friday, marking the steepest weekly fall since early April. This decline came as market participants responded to reports of a potential agreement between the United States and Iran that could prolong a ceasefire and ease restrictions on shipping through the Strait of Hormuz.
Brent crude futures fell to approximately $92 per barrel, while U.S. West Texas Intermediate (WTI) crude decreased to below $88 per barrel. These declines positioned both benchmarks at their lowest levels since mid-April, with Brent falling by about 11% for the week and WTI losing over 9%.
The market’s reaction was largely influenced by reports suggesting Washington and Tehran had reached a preliminary understanding to extend a ceasefire and potentially reopen the Strait of Hormuz, a vital artery for global energy transport. Iranian media noted that Tehran was in the final stages of reviewing the proposed agreement, though a conclusive decision remained pending.
The prospective enhancement of oil flows through the strait alleviated some concerns over supply disruptions that had previously driven up prices amid the conflict. Despite this, uncertainty persists as shipping activity through the waterway remains significantly below pre-conflict levels. Analysts have pointed out that traders are closely monitoring developments related to the potential U.S.-Iran deal, with many investors opting to close bullish positions as prices continue to retreat. Nonetheless, some forecasts indicate that prices could stay high if shipping disruptions are prolonged.
In a related development, Saudi Arabia is anticipated to reduce its official selling prices for crude exports to Asia for a second consecutive month, driven by weaker demand and easing spot market premiums. Demand from major Asian buyers has remained muted despite ongoing supply concerns in the Middle East. Additionally, recent U.S. inventory data revealed declines in crude oil, gasoline, and distillate stockpiles, indicating stronger domestic demand and increased refinery activity.