Oil prices were relatively stable on Friday, although crude benchmarks remained on course for their largest weekly declines in nearly three months as investors weighed reports of progress toward a potential extension of the ceasefire between the United States and Iran.
By 0810 GMT, Brent crude futures for July delivery were trading 0.3% lower, down 34 cents at $94.05 per barrel. U.S. West Texas Intermediate crude futures held near unchanged levels at $88.89 per barrel after both contracts had fallen by more than 1% earlier in the day.
The weekly losses have been substantial. Brent is set to finish the week down around 9%, marking its sharpest decline since the week ending April 6. Meanwhile, WTI has shed almost 8%, putting it on track for its biggest weekly drop since the week ending April 13.
Diplomatic talks remain the dominant market driver
Despite ongoing supply disruptions and tightening inventories, market participants continue to focus primarily on developments surrounding negotiations between Washington and Tehran.
“While oil flows through the Strait of Hormuz remain restricted and oil inventories keep falling, the market focus remains on the possibility of a deal between the U.S. and Iran,” said UBS analyst Giovanni Staunovo.
Sources cited by Reuters said the two countries reached a preliminary understanding on Thursday that would extend the existing ceasefire and remove restrictions on maritime traffic through the Strait of Hormuz. However, the proposal still requires approval from U.S. President Donald Trump, while Iranian state media has stated that discussions have not yet resulted in a finalised agreement.
Hormuz shipping route remains critical to energy markets
Recent trading sessions have been characterised by significant price swings, with both Brent and WTI moving as much as $6 per barrel as investors reacted to changing headlines regarding the Iran conflict and the future status of the Strait of Hormuz.
Before the outbreak of hostilities, the strategic waterway handled roughly one-fifth of global oil and liquefied natural gas shipments, making it one of the world’s most important energy transit routes.
Although hopes of reopening the passage have improved market sentiment, shipping activity through the corridor remains only a fraction of the levels seen before the conflict erupted.
Analysts at ING noted that restoring normal traffic through the strait would provide immediate relief for global energy markets, although they cautioned that the recovery process could take time and remains far from guaranteed.
The disruption has already had a noticeable impact on major importing nations. Japan, which relies heavily on Middle Eastern crude supplies, reported a 66% decline in oil imports last month compared with the same period a year earlier.
Falling U.S. inventories provide underlying support
At the same time, inventory figures from the U.S. Energy Information Administration pointed to stronger underlying demand conditions.
Data released on Thursday showed that U.S. stockpiles of crude oil, gasoline and distillates all declined during the previous week as refinery utilisation increased and consumer demand strengthened.
Exports also moved lower, falling by 1.16 million barrels per day to 4.4 million barrels per day.
While expectations of a diplomatic breakthrough have weighed heavily on prices this week, the combination of shrinking inventories, constrained supply routes and resilient demand continues to offer support to the oil market and could help limit further downside in the near term.
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