Oil prices declined on Friday but remained on course to finish the week above $100 per barrel for the first time since mid-May, while the US national average diesel price reached a record high amid disruptions to energy supplies and shipping routes.
Brent crude futures fell $1.65, or 1.53%, to $105.98 per barrel by 07:58 GMT. US West Texas Intermediate crude declined $1.36, or 1.33%, to $101.12.
Both benchmarks reversed earlier gains after the Financial Times reported that Middle Eastern foreign ministers were seeking a temporary agreement with Iran covering shipping through the Strait of Hormuz.
Brent and WTI had gained more than 6% on Thursday and remained more than 10% higher for the week.
“Some headlines of possible new talks in the Middle East are weighing moderately on oil prices today,” UBS energy analyst Giovanni Staunovo said, adding: “I keep seeing near-term risks to the upside for oil prices, but we should expect ongoing high price volatility too”.
Strait of Hormuz Traffic Falls Below Recent Average
Iran said it attacked 10 ships near the Strait of Hormuz on Wednesday after the US struck five Iranian oil tankers. Iran’s Islamic Revolutionary Guard Corps said it would increase its response to further attacks.
Preliminary ship-tracking data showed vessel transits through the Strait of Hormuz fell to seven on Thursday from 11 on Wednesday, compared with a 10-day average of 15.
Before the Iran war began in late February, approximately one-fifth of daily global oil and liquefied natural gas supplies passed through the Strait of Hormuz.
Iran-aligned Houthi forces took control of Yemen’s port of Mocha on Thursday, adding to risks affecting Red Sea shipping. The source also cited attacks from Yemen on Saudi energy facilities as a further development affecting regional supply concerns.
The International Energy Agency said global oil supply and demand are expected to decline by more than previously forecast this year, with the continuation of the Iran war delaying the normalisation of Middle East flows into 2027.
US Diesel Price Moves Above $6 Per Gallon
Disruptions associated with the Iran war and Ukrainian attacks on Russian refineries contributed to the US national average diesel price exceeding $6 per gallon for the first time on Thursday, according to GasBuddy.
“Refined products, particularly diesel, are feeling a one-two punch right now,” KCM Trade chief market analyst Tim Waterer said.
“As long as both the Gulf shipping constraints and Russian refining outages remain in play, diesel and other refined products are likely to show a higher upside tendency than the broader crude market,” he added.
US President Donald Trump said the US could strike Iran’s Pickaxe Mountain near the damaged Natanz uranium enrichment facility. He also said he believed the war would end immediately after the November midterm elections.
Separately, China’s state planner said retail price caps for petrol and diesel will increase from September 12 by 260 yuan ($38.76) and 250 yuan per metric ton, respectively.