Oil prices declined by approximately 2% on 29 May as reports emerged that the US and Iran may have reached an agreement on a potential ceasefire extension.
By 10:59 GMT, July Brent crude futures, which expire today, had dropped by $1.66, or 1.77%, to $92.05 a barrel (bbl), reported Reuters.
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August Brent contracts, which have greater trading volumes, fell by $1.63 to $91.07/bbl. US West Texas Intermediate (WTI) futures also declined by $1.55, or 1.74%, to $87.35/bbl.
For the week, Brent crude has dropped around 11%, its steepest decline since the week ending 6 April. WTI also saw a significant weekly fall of nearly 10%, its sharpest since the week ending 13 April.
Price volatility was notable, with both benchmarks swinging as much as $6/bbl on differing reports about a potential end to the Iran conflict and the status of the Strait of Hormuz.
The Strait of Hormuz, a key waterway for oil and liquefied natural gas (LNG) shipments, remains largely disrupted, with traffic at a fraction of pre-conflict levels.
Previously, it accounted for around a fifth of global oil and LNG supplies.
The news agency reported that Japanese crude oil imports from the Middle East have also been affected, with a 66% year-on-year drop reported in April.
Reuters also noted that Commerzbank revised its Brent crude price forecasts to $90/bbl by the end of September and $85/bbl by year-end, assuming restricted shipping through the strait for at least two more months.
The US Energy Information Administration reported a drop in domestic stocks of crude oil, gasoline and distillates last week due to higher consumption by refiners and end users. Exports declined by 1.16 million barrels per day (mbbl/d) to 4.4mbbl/d.
Earlier this month, the Philippines received a cargo of Iranian crude for the first time since the regional conflict disrupted normal trade flows. Ship-tracking data indicated that Suezmax tanker the Ocean Start delivered crude oil to Petron’s Bataan refinery on 17 May, with a capacity of 1mbbl.
A report by GlobalData TS Lombard, written by Freya Beamish, suggests that oil revenue is a key priority for Iran. However, uncertainty remains over whether the regime will seek bilateral agreements within the Gulf or broader negotiations, particularly as an extended closure of shipping routes could encourage the development of alternative export channels.
