Oil prices experienced a significant drop of over 2 percent on Friday, marking the steepest weekly decline since early April. This downturn was influenced by emerging reports of a potential deal between the United States and Iran, which could lead to an extension of a ceasefire and a relaxation of restrictions on shipping through the crucial Strait of Hormuz.
Brent crude futures settled at approximately $92 per barrel, while U.S. West Texas Intermediate (WTI) crude fell below $88 per barrel. These figures represent the lowest levels for both benchmarks since mid-April, with Brent seeing an 11 percent decrease over the week and WTI falling by more than 9 percent.
The market’s reaction was largely driven by reports suggesting that Washington and Tehran had reached a preliminary agreement to extend the ceasefire and potentially reopen the Strait of Hormuz, a vital corridor for global energy supplies. Iranian media indicated that Tehran was in the final stages of evaluating this proposed deal, although a definitive decision had not been finalized.
This development eased some of the supply disruption concerns that had previously driven prices up during recent conflicts. Nonetheless, uncertainty lingers as shipping activity through the strait remains significantly below levels observed before the conflict. Analysts highlighted that traders are closely monitoring the progress of the potential U.S.-Iran agreement, with many investors opting to close bullish positions amid the ongoing price decline. Despite the drop, some projections suggest that oil prices could stay high if disruptions to shipping persist over a longer period.
In a related development, Saudi Arabia is anticipated to lower its official selling prices for crude exports to Asia for a second month in a row due to waning demand and a reduction in spot market premiums. Demand from key buyers, especially those in Asia, has continued to be sluggish despite persistent supply concerns in the Middle East. Additionally, recent U.S. inventory figures showed a decrease in crude oil, gasoline, and distillate stockpiles, indicative of stronger domestic demand and increased refinery activity.