Oil prices experienced a decline of over $1 on Friday, continuing the downward trend from the prior session. This drop followed U.S. President Donald Trump’s decision to abandon plans for military action against Iran, which alleviated concerns about escalating tensions after a series of retaliatory attacks earlier in the week.
As of 0410 GMT, Brent crude futures decreased by $1.83, or 2%, settling at $88.55 per barrel. Similarly, U.S. West Texas Intermediate (WTI) crude fell by $1.60, equivalent to a 1.8% drop, bringing it to $86.11.
Trump, who had previously threatened significant military strikes against Iran, announced on Thursday that these actions would not proceed, indicating that negotiations with Iran had made progress. He suggested that a peace agreement that could reopen the Strait of Hormuz for shipping might be reached as soon as the upcoming weekend. However, Iran’s semi-official Fars news agency reported that Tehran had yet to consent to any draft agreement.
IG market analyst Tony Sycamore commented on the market’s response, stating, “While this could indeed be another false dawn, the market’s reaction has been both immediate and significant.” He pointed out that even with the current downward correction in oil prices, as long as prices remain above the support level in the low $80s, the potential for upward movement still exists.
Additionally, on Thursday, Iran declared the “closure” of the Strait of Hormuz, where vessel traffic had already been highly restricted. The Iranian government warned it would target any ships attempting to navigate through this critical waterway, which typically handles about 20% of global oil and liquefied natural gas shipments. Tehran’s ongoing blockade has contributed to sustained high energy prices.
Reports from state media on Friday indicated that Iranian forces had stopped a tanker from passing through the Strait of Hormuz without proper authorization. However, the U.S. military confirmed via social media that commercial vessels continued to navigate the waterway.
ING analysts expressed caution regarding the potential extension of the ceasefire, suggesting it might not be guaranteed. They noted that if nuclear negotiations do not progress, the situation could quickly deteriorate. They foresee a critical turning point in the market around late July if oil flows do not resume by then, anticipating that inventory levels combined with seasonal demand could drive prices significantly higher, potentially reaching $120 to $130 per barrel.
On Thursday, the Organization of the Petroleum Exporting Countries (OPEC) revised its 2026 global oil demand growth forecast downward, adjusting it to 970,000 barrels per day (bpd) from a prior estimate of 1.17 million bpd, marking the second consecutive decrease in their outlook.
Nonetheless, the producer organization projected a recovery in consumption later on, increasing its demand growth forecast for 2027 to 1.73 million bpd, which is an upward revision of 190,000 bpd from its earlier estimation.
Source: Financial Chronicle Biz English | Sri Lanka Business News.
