Oil Heads for Weekly Loss as Hormuz Flows Recover Despite Iran Tensions
SINGAPORE — WEB DESK: Oil prices fell on Friday and were heading for their first weekly decline in three weeks as signs of improving crude shipments through the Strait of Hormuz outweighed persistent geopolitical risks and stalled diplomatic efforts between the United States and Iran.
Brent crude futures were down 60 cents, or 0.67%, at $89.10 a barrel, while US West Texas Intermediate (WTI) crude dropped 64 cents, or 0.77%, to $82.89 at the time of the source report.
Despite continuing uncertainty over Iran and the Middle East, both benchmarks were on course to snap a two-week winning streak.
Brent was heading for a weekly decline of about 5.3%, while WTI was down roughly 4.3% for the week.
Hormuz Oil Flows Ease Supply Fears
One of the most important factors weighing on prices has been evidence that additional crude is moving through the Strait of Hormuz despite the continuing regional conflict.
ING analysts said producers were increasingly adapting to the operating environment around the strategic waterway, helping ease some of the supply fears that had previously supported oil prices.
The Strait of Hormuz remains one of the world’s most important energy chokepoints, linking major Gulf oil and gas producers with global markets.
Although shipments remain significantly below levels seen before the war, recent data suggest a partial recovery.
Goldman Sachs estimated Gulf oil exports at around 15 million to 16 million barrels per day, which is roughly 5 million to 6 million bpd above the low reached in March. However, exports remain around 7 million to 8 million bpd below pre-war levels.
The recovery has reduced part of the geopolitical risk premium embedded in crude prices.
US-Iran Diplomacy Remains Stalled
The improvement in shipping comes despite little evidence of a breakthrough in efforts to resolve the wider confrontation between Washington and Tehran.
Oil prices had risen in the previous session after reports that US President Donald Trump was unwilling to return to the terms of an earlier memorandum of understanding with Iran.
Brent settled 2.1% higher on Thursday, ending a three-session losing streak after reports cast doubt on prospects for reviving the earlier framework.
The White House also said on Thursday that the United States was not currently negotiating with Iran, despite mediation efforts by regional governments seeking to bring the two sides back into dialogue.
According to reporting cited by Reuters, the Trump administration has repeatedly told mediators that it has no interest in reviving the June memorandum, complicating efforts to restart negotiations.
New US Sanctions Fail to Push Oil Higher
Washington announced a new package of measures against Iran earlier this week, describing them as its toughest sanctions yet.
Tehran condemned the sanctions as hostile and said such economic pressure had lost its effectiveness.
Normally, an escalation in sanctions against a major oil producer could increase fears of tighter supplies and push crude prices higher.
This time, however, traders appear to be giving greater weight to improving physical oil flows and signs that Gulf producers are finding ways to move more crude despite continued tensions.
That has helped keep Brent below the psychologically significant $90-a-barrel level during Friday trading.
Gulf Oil Exports Remain Below Pre-War Levels
The partial recovery in Gulf exports does not mean the region’s oil trade has returned to normal.
Goldman Sachs’ estimate indicates that millions of barrels per day of potential exports remain unavailable compared with pre-war conditions.
Reuters also reported signs of a tentative recovery in crude movements through Hormuz, while shipping activity through other strategically important Middle Eastern waterways has continued.
The result is an unusual balance for the oil market: geopolitical risks remain elevated, but improving physical supply conditions are preventing those risks from translating into a sustained price rally.
Venezuela Adds Another Variable for Oil Markets
Oil traders are also watching developments involving Venezuela.
The United States is seeking greater access to Venezuelan crude, while Caracas is considering changes to its relationship with OPEC, according to Reuters.
Any significant increase in Venezuelan barrels reaching global markets could add another source of supply at a time when traders are reassessing how much geopolitical premium should remain in crude prices.
Wider Geopolitical Risks Remain
Iran is not the only geopolitical issue influencing energy markets.
Russia has warned it could retaliate against British military targets following Ukrainian attacks on Russian territory involving British-supplied long-range weapons, adding another source of uncertainty for commodity traders.
Energy markets therefore remain exposed to sudden price movements if conflicts disrupt production, refineries, pipelines or major shipping routes.
For now, however, the oil market appears focused on actual barrels reaching international buyers rather than geopolitical rhetoric alone.
The key question heading into the coming week will be whether the recovery in Strait of Hormuz shipping can be sustained. If Gulf exports continue increasing, downward pressure on crude could persist. Any renewed disruption to the waterway, however, could quickly restore a substantial geopolitical risk premium.
