Oil prices experienced a significant drop of over 2 percent on Friday, poised for their steepest weekly decline since early April. The market responded to reports suggesting a potential agreement between the United States and Iran, which might extend a ceasefire and alleviate shipping restrictions through the Strait of Hormuz.
Brent crude futures fell to approximately $92 per barrel, while U.S. West Texas Intermediate (WTI) crude prices slipped below $88 per barrel. These declines marked the lowest levels for both benchmarks since mid-April, with Brent seeing an 11 percent decrease for the week and WTI shedding more than 9 percent.
The market’s reaction was influenced by news of a tentative understanding between Washington and Tehran to prolong the ceasefire and facilitate the reopening of the Strait of Hormuz, a crucial global energy corridor. Iranian media indicated that Tehran was in the final stages of evaluating the proposed agreement, though a final decision had yet to be reached.
The potential for increased oil flow through the strait eased concerns over supply disruptions that had previously driven sharp price hikes amid the recent conflict. Nevertheless, uncertainty lingers as shipping traffic through the waterway remains significantly below pre-conflict levels. Analysts noted that traders are closely monitoring developments related to a possible U.S.-Iran deal, with many investors opting to close bullish positions as prices continue to decline. Despite the recent downturn, forecasts suggest that oil prices could remain high if shipping disruptions persist over a prolonged period.
In addition, Saudi Arabia is anticipated to reduce its official selling prices for crude exports to Asia for the second month in a row, responding to weaker demand and declining spot market premiums. Major buyers, particularly in Asia, have shown subdued demand despite ongoing supply concerns in the Middle East. Recent U.S. inventory data also revealed declines in crude oil, gasoline, and distillate stockpiles, indicating stronger domestic demand and increased refinery activity.