NEW YORK: Oil futures settled lower on Friday and posted their biggest weekly decline since 2022 ahead of talks between Iran and the US aimed at securing a permanent ceasefire.
Crude futures hovered near $100 a barrel as attacks continued and the flow of oil through the Strait of Hormuz remained heavily restricted, and concerns lingered over potential supply disruptions in Saudi Arabia. Prices in the physical market were at record highs.
Brent futures settled down 72 cents, or 0.8 percent, at USD95.20 a barrel, capping a week in which contracts fell 12.7 percent. The decline followed a sharp selloff after Iran and the US agreed on Tuesday to a two-week ceasefire brokered by Pakistan. It was Brent’s steepest weekly loss since August 2022.
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US West Texas Intermediate crude futures fell USD1.30, or 1.3 percent, to settle at USD96.57 a barrel, with a weekly decline of 13.4 percent, its largest since April 2020 during lockdowns for the pandemic.
“The key issue for the oil market is whether ship traffic through the Strait of Hormuz will resume. So far, there are no signs of this happening. If oil supplies from the Persian Gulf remain blocked, oil prices are likely to rise again,” Commerzbank analysts said in a note on Friday.
Traffic through the strait remained less than 10 percent of normal volumes as Tehran warned ships to keep to its territorial waters. Most ships that have sailed through the Strait in the past day were linked to Iran, ship-tracking data showed on Friday.
Iran wants to charge fees for ships to pass through the strait under a peace deal, a Tehran official told Reuters on April 7. Western leaders and the United Nations’ shipping agency have pushed back on that idea.
The crucial artery for oil and gas flows has been effectively shut down by the conflict that began when the US and Israel launched air strikes against Iran on February 28.
More than 60 energy infrastructure assets across the Gulf have been hit by drone and missile strikes. While most attacks are not expected to cause prolonged disruptions, at least eight facilities face lengthy repair timelines, according to a Thursday note from Natasha Kaneva, head of global commodities research at J.P. Morgan.
Middle East producers shut in about 7.5 million barrels per day (bpd) of crude oil production in March as storage capacity tightened, with outages projected to rise to 9.1 million bpd in April, the Energy Information Administration said in a report earlier this week.
The sharp hit to global oil production from the Iran war is poised to flip the oil market into a supply deficit this year, analysts say, a huge swing in forecasts that erases previous expectations of comfortable oversupply.
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