Oil prices were little changed on Friday, although both major crude benchmarks remained on course for their sharpest weekly declines since early April amid growing expectations that diplomatic progress between the United States and Iran could ease supply concerns.
By 0810 GMT, Brent crude futures for July delivery were down 34 cents, or 0.3%, at $94.05 per barrel. U.S. West Texas Intermediate crude traded broadly flat at $88.89 per barrel after both contracts had fallen by more than 1% earlier in the session.
The recent sell-off has been significant. Brent crude is set to record a weekly decline of roughly 9%, marking its largest weekly drop since the week ending 6 April. WTI is on track for a loss of nearly 8%, which would represent its steepest weekly fall since the week ending 13 April.
Markets focus on diplomatic developments
Attention across energy markets remains firmly fixed on negotiations between Washington and Tehran, despite continuing disruptions to shipping flows through the Strait of Hormuz and declining global inventories.
“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 United States and Iran reached a preliminary agreement on Thursday to extend a ceasefire and remove restrictions affecting shipping through the Strait of Hormuz. However, the proposal has not yet received approval from U.S. President Donald Trump, while Iranian state media has indicated that no final agreement has been concluded.
Strait of Hormuz remains central to oil outlook
Oil prices have experienced substantial volatility in recent trading sessions, with both Brent and WTI moving by as much as $6 per barrel on shifting headlines surrounding the conflict in Iran and the future status of the Strait of Hormuz.
The strategic waterway previously handled around one-fifth of global oil and liquefied natural gas supplies, making it one of the most important transport routes in international energy markets.
Although discussions about reopening the route have improved sentiment, maritime traffic through the strait remains well below levels recorded before the conflict began.
Analysts at ING noted that a full reopening of the waterway would provide immediate support to global energy supply chains, although the pace and extent of any recovery remain uncertain.
The impact of the disruption has been felt across importing nations. Japan, one of the world’s largest buyers of Middle Eastern crude, reported a 66% year-on-year decline in oil imports last month compared with April of the previous year.
U.S. inventories decline as demand improves
Meanwhile, fresh inventory data from the U.S. Energy Information Administration provided evidence of stronger domestic demand.
According to figures released on Thursday, U.S. stockpiles of crude oil, gasoline and distillates all declined during the previous week as refinery activity and consumer demand increased.
Exports also fell during the period, declining by 1.16 million barrels per day to 4.4 million barrels per day.
The combination of falling inventories and ongoing uncertainty surrounding Middle Eastern supply routes continues to provide underlying support for oil prices, even as markets increasingly price in the possibility of a diplomatic breakthrough between the United States and Iran.