Oil prices experienced a significant drop of over 2 percent on Friday, marking the steepest weekly decrease since early April. This decline came as markets responded to reports suggesting a potential deal between the United States and Iran. The agreement could lead to an extension of a ceasefire and the easing of 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 slipped below $88 per barrel. Both benchmarks reached their lowest levels since mid-April, with Brent down around 11 percent for the week and WTI losing over 9 percent. The market reacted to news that the U.S. and Iran might have reached a preliminary understanding to prolong the ceasefire and facilitate the reopening of the Strait of Hormuz, a critical global energy corridor. Iranian media indicated that Tehran was nearing the final stages of reviewing the proposed agreement, although no final decision had been made.
The potential for improved oil flows through the strait has alleviated concerns over supply disruptions, which had previously driven up prices amid the ongoing conflict. Nevertheless, uncertainty lingers as shipping traffic through the strait remains below pre-conflict levels. Analysts noted that traders are closely watching developments regarding the U.S.-Iran negotiations, with many investors unwinding bullish positions as oil prices continue to decline. Despite the recent downturn, some forecasts suggest that prices could remain elevated if shipping disruptions persist over a prolonged period.
In a related development, Saudi Arabia is anticipated to reduce its official selling prices for crude exports to Asia for the second month in a row, due to weaker demand and easing spot market premiums. Demand from key buyers, particularly in Asia, has remained subdued even amid ongoing supply concerns in the Middle East.
Additionally, recent U.S. inventory data revealed declines in crude oil, gasoline, and distillate stockpiles. This reflects stronger domestic demand and increased refinery activity, further influencing market dynamics and contributing to the overall movement in oil prices.