Oil prices fell more than 1% on Friday as traders weighed a possible phased US-Iran deal to reopen the Strait of Hormuz against renewed Houthi missile attacks on Saudi Arabia. Brent crude slid to $105.52 a barrel and WTI to $92.93, even as the Brent-WTI spread widened to its largest gap since May on fears of a US diesel-export ban.
Truce hopes pull crude off its highs
Brent crude fell $1.08, or 1%, to $105.52 a barrel by 1023 GMT, while West Texas Intermediate dropped $1.68, or 1.8%, to $92.93. For the week, Brent has gained 1.5% while WTI has dropped 7.4%. On Thursday, both contracts had touched a one-week high, rising as much as 5%.
US and Iranian negotiators in New York are exploring a phased path out of the war under which Tehran would reopen the Strait of Hormuz and Washington would lift its economic blockade of Iran, according to sources close to the talks. Iran has offered to reopen the strait within seven days if the US meets its terms, and its foreign minister, Araghchi, is staying in New York over the weekend to await a US response. Iranian President Masoud Pezeshkian said Thursday it is now up to the US to decide when the war ends. According to Reuters: "The next couple of days could represent a watershed moment in the Iran War," SEB Research's Erik Meyersson said in a note.
Houthi strikes test Saudi supply lines
Yet the diplomacy is unfolding against fresh attacks on Gulf infrastructure. Saudi Arabia intercepted six ballistic missiles fired by Yemen's Iran-backed Houthis, thwarting strikes on the Taif area and the Yanbu Red Sea hub. Saudi Arabia is building up crude pumping through its East-West pipeline to Yanbu, though tanker loadings there have yet to resume, and ship-to-ship transfers in the Gulf of Oman have reached their limits after the kingdom diverted exports from the Red Sea. Since the war began at the end of February, roughly a fifth of the world's oil and gas shipments have been curtailed.
Diesel fears widen the Brent-WTI spread
The Brent-WTI spread has widened to $12.83 a barrel, its widest since May, even though the two benchmarks usually move in tandem. Traders blame fears of a US ban on diesel exports that could flood the domestic market, forcing refiners to process less crude if diesel output gets stuck at home. That could ease domestic diesel prices, which hit a record $6.528 a gallon this week and stirred political uproar, but it also hints at higher gasoline prices ahead. Meanwhile, crude flows out of the Strait of Hormuz reached 33.7 million barrels so far this week, roughly on track with the prior week, preliminary Kpler ship-tracking data showed.
Sources: InvestingLive, Reuters (via Investing.com)
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