This week, oil prices experienced a significant downturn, dropping by more than 2 percent on Friday alone. This marks the steepest weekly decrease since early April, driven by reports suggesting a potential agreement between the United States and Iran. Such an accord could potentially extend a ceasefire and ease shipping restrictions through the strategically crucial Strait of Hormuz.
On the market, Brent crude futures fell to approximately $92 per barrel, while U.S. West Texas Intermediate (WTI) crude dipped below $88 per barrel. This represents the lowest levels for both benchmarks since mid-April, with Brent experiencing an 11 percent decline over the week and WTI seeing a drop of over 9 percent.
The prospect of a U.S.-Iran agreement has stirred market sentiment, as Washington and Tehran reportedly reached a preliminary understanding to prolong a ceasefire and enable the reopening of the Strait of Hormuz, a vital global energy passage. Iranian outlets have indicated that Tehran is in the final stages of reviewing the deal, though a definitive resolution has yet to be announced.
Such developments have alleviated some of the supply disruption concerns that previously drove price spikes amid the conflict. Nonetheless, uncertainty persists, as shipping traffic through the strait remains significantly below the levels seen before the conflict erupted. Analysts note that traders are closely monitoring these negotiations, with many investors choosing to close bullish positions as oil prices continue to decline. Despite the recent downturn, some forecasts anticipate that prices could stay elevated if shipping disruptions persist for a prolonged period.
In addition, Saudi Arabia is anticipated to reduce its official selling prices for crude exports to Asia for the second month running, in response to weaker demand and diminishing spot market premiums. Major buyers, particularly in Asia, remain cautious, with demand subdued despite ongoing supply concerns in the Middle East. Recent data from the U.S. also highlighted reductions in crude oil, gasoline, and distillate stockpiles, indicating stronger domestic demand and increased refinery activity.