Brent Heads for Sharp Weekly Drop

Brent rose to around $80 per barrel on Friday after planned talks between the US and Iran in Switzerland was cancelled as confirmed by the Swiss Foreign Ministry. Israel also continued to carry out strikes on Hezbollah targets in Lebanon. Still, oil prices were on track for a sharp weekly decline as investors welcomed improving shipping conditions in the Strait of Hormuz after the US-Iran interim peace took effect. The US Central Command announced it had lifted restrictions on traffic to and from Iranian ports and coastal waters, while the Joint Maritime Information Center advised vessels transiting the strait to follow a route closer to Oman’s coastline to reduce the risk from mines. Tankers carrying previously stranded crude began exiting the waterway on Thursday, and Kuwait said it would begin increasing production. As a result, oil prices have erased nearly all the gains recorded since the Middle East conflict began in late February.

Brent rose above $80 per barrel on Friday but was still on track for a sharp weekly decline, as investors welcomed improving shipping conditions in the Strait of Hormuz following the implementation of the US-Iran interim peace agreement, which brought an end to a prolonged conflict that triggered the largest supply disruption on record. The US Central Command announced it had lifted restrictions on traffic to and from Iranian ports and coastal waters, while the Joint Maritime Information Center advised vessels transiting the strait to follow a route closer to Oman’s coastline to reduce the risk from mines. Tankers carrying previously stranded crude began exiting the waterway on Thursday, and Kuwait said it would begin increasing production. As a result, oil prices have erased nearly all the gains recorded since the Middle East conflict began in late February.

Brent crude oil dropped below $78 per barrel on Thursday, the lowest level since early March, as markets reacted to the US and Iran reaching an agreement to end a prolonged conflict that caused the largest supply disruption on record. Early signs of progress emerged as several vessels began crossing the Strait of Hormuz again after weeks of disruption. President Donald Trump said an interim agreement had been signed, with plans to quickly reopen the key Persian Gulf shipping route. A return to normal flows through Hormuz could allow major producers including Saudi Arabia, the UAE and Iraq to restart millions of barrels of halted output. Oil has already fallen around 38% since reaching a four-month high in April. Shipping activity has shown signs of recovery, with Saudi oil tankers and vessels carrying LNG and fuel leaving the Gulf region. However, inventory levels remain tight, with crude stocks at Cushing, the largest US storage hub, falling to around 20 million barrels.