Oil prices experienced a significant drop of over 2 percent on Friday, heading towards their steepest weekly decline since early April. This downturn was largely influenced by reports suggesting a possible agreement between the United States and Iran aimed at extending a ceasefire and easing restrictions on the vital Strait of Hormuz shipping route.
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 decreasing about 11 percent and WTI down more than 9 percent over the week.
The market’s reaction was largely driven by indications that Washington and Tehran might have reached a preliminary agreement to maintain the ceasefire and reopen the Strait of Hormuz, a crucial global energy passage. While Iranian media indicated that Tehran was reviewing the proposed deal, a final decision had not been confirmed.
The prospect of enhanced oil flow through the strait alleviated fears of supply disruptions that had previously driven up prices amid the recent conflict. Despite this, uncertainty lingers as shipping activity through the strait remains below pre-conflict levels. Analysts note that traders are closely monitoring the potential U.S.-Iran deal developments, with many investors pulling back from bullish positions as prices continue their decline. Forecasts suggest prices could stay elevated if shipping disruptions endure.
In addition, Saudi Arabia is projected to reduce its official selling prices for crude exports to Asia for the second month in a row, responding to weaker demand and easing spot market premiums. Demand from major Asian buyers has remained tepid despite the ongoing supply issues in the Middle East. Meanwhile, recent U.S. inventory reports showed declines in crude oil, gasoline, and distillate stockpiles, indicating stronger domestic demand and increased refinery activity.