WTI crude fell 2.3% to settle at $92.41 a barrel on Friday, its first weekly drop since late August, as the US and Iran edged toward a deal to reopen the Strait of Hormuz. Iran's foreign minister says Tehran has handed Washington a seven-day plan, but physical-market tightness is still flashing warning signs.
Prices retreat on hopes for a Hormuz breakthrough
Oil fell as traders grew more confident that talks between the US and Iran to reopen the world's most important energy shipping route were progressing. WTI futures for November delivery fell 2.3% to settle at $92.41 a barrel in New York. Brent for November settlement fell 2.1% to $104.32 over the same session.
The two countries are pushing for a breakthrough that would see Tehran reopen the strait and Washington lift its blockade of Iranian ports. Iran's Foreign Minister Abbas Araqchi told reporters at the United Nations that Tehran has given the US a "concrete" seven-day plan to reopen Hormuz, according to Reuters: "The choice now rests with the United States". He said the steps required of Washington are already outlined in the memorandum of understanding the two countries agreed in June.
Physical market still signals tightness
Still, the warring sides have appeared close to a deal many times before, only for talks to collapse. Emily Ashford, head of energy research at Standard Chartered Bank, cautioned that even a diplomatic breakthrough would not immediately restore disrupted flows or boost dwindling inventories.
Several metrics still point to elevated near-term supply concerns. Brent's prompt spread has widened to nearly $7 a barrel, from less than $1 at the end of last month — a backwardation pattern that marks a tight market. Traders also paid record premiums on Thursday to secure prompt barrels at the Cushing, Oklahoma storage hub, and some European refiners were told they would be allocated no crude in October under long-term Saudi agreements after the kingdom's East-West pipeline was shut because of attacks.
Shipping risks persist despite the diplomacy
Risks to shipping through the Gulf remain even as Persian Gulf suppliers keep slipping crude through Hormuz. A cargo vessel was reportedly on fire and adrift after being struck by an unknown projectile earlier this week. Saudi Arabia intercepted missiles fired toward the Red Sea port of Yanbu and the city of Taif on Thursday as Iran-backed Houthi militants launched more strikes. For the year, Brent remains more than 70% higher, adding to inflationary pressures.
Sources: Rigzone, Investing.com (snippet-based)
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