Oil prices experienced a significant drop of more than 2 percent on Friday, marking their steepest weekly decline since early April. This decline comes amid reports of a potential agreement between the United States and Iran that could extend a ceasefire and alleviate shipping restrictions in the Strait of Hormuz, a crucial global energy passage.
In the markets, Brent crude futures fell to nearly $92 per barrel, while U.S. West Texas Intermediate (WTI) crude dipped below $88 per barrel. Both benchmarks reached their lowest points since mid-April, with Brent plummeting approximately 11 percent and WTI decreasing by over 9 percent for the week.
The decline in oil prices was largely influenced by reports suggesting that Washington and Tehran have tentatively agreed to extend a ceasefire and potentially reopen the Strait of Hormuz. Iranian media have indicated that Tehran is in the final stages of reviewing this proposed agreement, though a final decision has yet to be made. The prospect of improved oil flow through the strait has eased concerns about supply disruptions that had previously driven prices up during the conflict, but uncertainty remains as traffic through the waterway is still below pre-conflict levels.
Analysts note that traders are closely monitoring developments related to the possible U.S.-Iran deal, with many investors opting to close bullish positions as prices continue to fall. Despite the recent declines, some forecasts suggest that oil prices could remain elevated if disruptions in shipping persist over a longer period. Concurrently, Saudi Arabia is anticipated to reduce official selling prices for crude exports to Asia for the second consecutive month, responding to weaker demand and easing spot market premiums. Demand from major buyers in Asia remains subdued, even amid ongoing supply concerns in the Middle East.
Additionally, recent U.S. inventory data highlighted declines in stockpiles of crude oil, gasoline, and distillates, indicative of stronger domestic demand and increased refinery activity. This data further underscores the complex dynamics affecting global oil markets during this period of geopolitical uncertainty.