Oil futures settled lower on Friday ahead of talks between Iran and the United States aimed at securing a permanent ceasefire.
Brent futures lost 72 cents or 0.8 per cent to trade at $95.20 a barrel, while the US West Texas Intermediate (WTI) crude futures fell by $1.30 or 1.3 per cent to $96.57 a barrel. As a result, these benchmarks posted their biggest weekly decline since 2022.
Despite the ceasefire announced earlier this week, traffic through the critical oil chokepoint remains severely restricted and under supervision and approval by Iran’s Islamic Revolutionary Guard Corps (IRGC).
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.
Market analysts noted that the key issue for the oil market is whether ship traffic through the Strait of Hormuz will resume. However, there are no signs of this happening. If oil supplies from the Persian Gulf remain blocked, oil prices are likely to rise again.
According to Reuters, traffic through the strait remained less than 10 per cent of normal volumes as Iran warned ships to keep to its territorial waters. Most ships that have sailed through the Strait in the past day were linked to Iran.
Iran also wants to charge fees for ships to pass through the Strait under a peace deal.
Oil prices could spike and hit again their peak Iran-war levels at nearly $120 per barrel if a full recovery of vessel traffic through the Strait of Hormuz takes until July, according to JP Morgan.
Attacks on Saudi energy facilities have cut the kingdom’s oil production capacity by about 600,000 barrels per day and reduced its East-West Pipeline throughput by about 700,000 barrels per day.
Meanwhile, Lebanon said it intends to take part in a meeting with the US and Israeli representatives in Washington next week to discuss and announce a ceasefire.