Oil prices experienced a significant drop of more than 2% on Friday, marking what could be the most substantial weekly decline since early April. This downturn in the market comes as reports surface about a possible agreement between the United States and Iran, which may extend a ceasefire and ease restrictions on the vital shipping lane through the Strait of Hormuz.
In trading, Brent crude futures fell to approximately $92 per barrel, while U.S. West Texas Intermediate (WTI) crude dipped below $88 per barrel, hitting their lowest points since mid-April. Over the week, Brent crude saw an 11% decrease, and WTI crude suffered a loss exceeding 9%. These declines reflect heightened market sentiment influenced by the news of a tentative deal aimed at reopening the Strait of Hormuz, a crucial channel for global energy shipments.
As Iranian media reported that the government is in the final stages of evaluating the proposed agreement, no definitive decision has yet been made. Nonetheless, the prospect of increased oil flow through this strategic passage has alleviated some concerns regarding supply disruptions that recently drove up prices. Despite this potential easing, uncertainty lingers, given that shipping activity through the area remains significantly below levels seen before the conflict.
Market analysts suggest that traders are closely monitoring developments related to the potential U.S.-Iran arrangement, leading many investors to reconsider their bullish positions as prices continue to fall. Even with the current downward trend, projections indicate that oil prices could stay high if shipping interruptions persist over a longer period.
In the backdrop, Saudi Arabia is anticipated to reduce its official selling prices for crude exports to Asia for a second straight month, influenced by diminished demand and a decrease in spot market premiums. Demand from key buyers, particularly in Asian markets, remains weak despite the existing supply concerns in the Middle East. Concurrently, U.S. inventory reports reveal declines in crude oil, gasoline, and distillate stockpiles, highlighting stronger domestic consumption and increased refinery operations.