Global oil prices experienced a significant drop on Friday, decreasing by over 2 percent, as reports emerged of a potential diplomatic breakthrough between the United States and Iran. The anticipated agreement could prolong a ceasefire and potentially ease shipping limitations through the Strait of Hormuz, a vital corridor for international energy trade.
Brent crude futures saw a decline to roughly $92 per barrel, while the U.S. West Texas Intermediate (WTI) crude dipped below $88 per barrel. These prices marked the lowest levels recorded since mid-April, with Brent and WTI each posting their steepest weekly losses since early April, down approximately 11 percent and more than 9 percent, respectively.
The market’s reaction was largely influenced by speculation that Washington and Tehran might have reached a preliminary accord aimed at extending the ceasefire and reopening the strategically crucial Strait of Hormuz. Iranian media indicated that the proposal was under final review by Tehran, though a conclusive decision had yet to be made. The prospect of improved oil shipments through the strait alleviated some supply disruption concerns that had recently driven prices upward. Nonetheless, uncertainty lingers as current shipping activity through the waterway remains below the levels seen before the conflict.
Analysts observed that market participants are closely monitoring developments regarding the potential U.S.-Iran deal, with many investors opting to close bullish positions as oil prices continue their downward trajectory. Despite the recent price drop, forecasts suggest that oil prices might stay high if shipping interruptions endure for an extended period.
In the meantime, Saudi Arabia is anticipated to reduce its official selling prices for crude oil exports to Asia for the second month in a row, reflecting weaker demand and decreasing spot market premiums. Demand from major Asian buyers has remained modest, even as supply concerns in the Middle East persist. Additionally, recent U.S. inventory reports indicated declines in crude oil, gasoline, and distillate stockpiles, signifying stronger domestic demand and increased refinery activity.