In the latest turn of events impacting global energy markets, oil prices experienced a notable drop of over 2 percent on Friday, marking their steepest weekly decline since early April. This downturn follows reports of a potential agreement between the United States and Iran aimed at extending a ceasefire and easing restrictions on the crucial shipping lane through the Strait of Hormuz.
Brent crude futures took a hit, falling to approximately $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 experiencing an 11 percent decrease for the week and WTI seeing losses exceeding 9 percent.
The market’s reaction was largely driven by indications that Washington and Tehran might have reached a preliminary agreement to extend a ceasefire, potentially leading to the reopening of the Strait of Hormuz, a vital conduit for global energy supplies. Iranian sources indicated that the proposal is under review in Tehran, although a final decision has yet to be announced.
This development has alleviated some concerns about supply disruptions that had previously driven oil prices upward amid ongoing conflicts. Nonetheless, uncertainties linger as the volume of shipping traffic through the strait remains significantly below levels seen before the conflict began. Analysts note that traders continue to monitor the situation closely, with many opting to close bullish positions amidst the falling prices. Despite the recent dip, some forecasts suggest that oil prices could remain high if shipping disruptions persist over an extended period.
In the midst of these global shifts, Saudi Arabia is poised to reduce its official selling prices for crude exports to Asia for the second month in a row, largely due to weaker demand and decreasing spot market premiums. Demand from major Asian buyers has been subdued, even as supply concerns in the Middle East persist. Additionally, recent U.S. inventory data revealed declines in crude oil, gasoline, and distillate stockpiles, signifying stronger domestic demand and increased refinery activity.