On Friday, oil prices experienced a decline of more than 2 percent, marking what could be the steepest weekly drop since early April. This downturn comes as markets respond to reports suggesting a potential agreement between the United States and Iran. This deal might extend a ceasefire and ease restrictions on shipping through the critically important Strait of Hormuz.
The prices for Brent crude futures dipped to approximately $92 per barrel, whereas U.S. West Texas Intermediate (WTI) crude fell below the $88 per barrel mark. Both benchmarks reached their lowest levels since mid-April, with Brent seeing an 11 percent reduction for the week and WTI declining by over 9 percent.
The market’s reaction was largely influenced by reports claiming Washington and Tehran have tentatively agreed to prolong a ceasefire and potentially reopen the Strait of Hormuz, a vital conduit for global energy. Iranian media indicated that Tehran is nearing the completion of its review of the agreement, though a final decision remains pending.
The prospect of increased oil flow through the strait has alleviated fears about supply disruptions, which had previously led to significant price hikes amid the recent conflict. Nevertheless, uncertainty lingers as shipping traffic in the strait remains significantly below pre-conflict levels.
Analysts note that market participants are closely monitoring the developments related to the possible U.S.-Iran deal. Many investors are unwinding bullish positions as oil prices continue to drop. Despite the current decrease, forecasts suggest that prices could remain high if disruptions in shipping persist over an extended period.
In other developments, Saudi Arabia is anticipated to reduce its official selling prices for crude exports to Asia for the second month in a row, following weaker demand and decreasing spot market premiums. Demand from key buyers, especially in Asia, has been subdued, even though concerns about supply continue in the Middle East.
Additionally, recent U.S. inventory data has shown a reduction in stockpiles of crude oil, gasoline, and distillates, indicating stronger domestic demand and increased refinery activity.