Oil futures experienced a decline exceeding 1% on Friday, heading towards their largest weekly decrease since early April, in light of reports indicating that the United States and Iran have come to an agreement to extend a ceasefire, although the deal remains unfinalized.
As of 0330 GMT, Brent crude futures for July dropped by 1.1%, or $1.04, settling at $92.67 per barrel. Concurrently, U.S. oil futures decreased by $1.26, or 1.4%, to reach $87.64 per barrel. This week, Brent crude has seen a significant decrease of 10.5%, marking the most considerable drop since the week ending April 6, while WTI experienced a 9.2% decline, the largest weekly fall since April 13.
Sources informed Reuters that on Thursday, the U.S. and Iran had reached an understanding to prolong a ceasefire and ease shipping restrictions through the Strait of Hormuz. However, U.S. President Donald Trump has yet to grant his approval, and Iranian state media reported that the agreement has not been finalized.
IG analyst Tony Sycamore noted, “The prevailing sentiment is that the conflict is concluding, and a deal is forthcoming. If this narrative continues, crude oil prices could further decline towards trendline support in the low $80s.”
In recent sessions, oil prices have been fluctuating significantly, swinging by as much as $6 for both benchmarks, as mixed signals regarding the potential resolution of the three-month U.S.-Israeli conflict with Iran and the possible reopening of the Strait of Hormuz—an essential route for about 20% of the global oil and liquefied natural gas supplies—emerged.
Currently, traffic through this crucial maritime chokepoint remains only a fraction of its pre-war levels. Analysts from ING stated that reopening the strait could provide some immediate relief to the oil market, yet the path to recovery remains uncertain.
ING further commented, “Upstream oil production has significantly decreased since the outbreak of war, as producers have curtailed output to handle storage limitations. The recovery of upstream production is expected to be gradual rather than immediate.”
They also emphasized that refineries in the region will need time to increase their output, especially since some of the infrastructure was targeted in earlier attacks during the conflict.
Financial Chronicle Biz English | Sri Lanka Business News.
