Key Takeaways
- Oil prices dropped 2 percent on Friday due to hopes for a US-Iran truce.
- Brent futures fell to $104.32 a barrel, while WTI crude dropped to $92.41.
- Saudi Arabia faces ongoing attacks from Yemen’s Houthis, disrupting oil flows.
Oil prices fell by about 2 percent on Friday, with Brent futures settling at $104.32 a barrel and West Texas Intermediate (WTI) crude at $92.41. The decline reflects mounting hopes for a truce between the US and Iran, alongside concerns over potential US diesel export bans and ongoing attacks on Saudi Arabia by the Houthi group.
According to analysts at Ritterbusch and Associates, the market is assessing the possibility of a US diesel export ban, which is contributing to today's selling pressure. The premium of Brent crude over WTI rose to its highest since May, while US gasoline futures fell around 4 percent.
Despite the diplomatic efforts, Iran has stated it will not show flexibility over its nuclear program, even if the US accepts its proposal to reopen the Strait of Hormuz. This proposal includes steps such as lifting a US naval blockade on Iranian ports.
The complex is under pressure as the market continues to assess the possibility of a US diesel export ban, while talk of diplomatic progress toward opening the Strait of Hormuz is adding to today's selling. The premium of Brent crude over WTI rose to its highest since May for a third day in a row.
US and Iranian negotiators in New York are exploring a phased path out of war, involving Tehran reopening the Strait of Hormuz and Washington lifting its economic blockade of Iran. However, Iran has said it will show no flexibility over its nuclear program.
Saudi, Turkish, and Pakistani military chiefs are to discuss help for Saudi Arabia as it faces attacks by Yemen’s Houthis. The Houthis have launched strikes on the Saudi-backed government in Yemen and repeatedly fired into Saudi Arabia, disrupting oil flows from the world’s largest energy exporter.
Crude oil flows out of the Strait of Hormuz reached 33.7 million barrels in the week starting September 20, according to preliminary ship-tracking data from Kpler. Before the start of the Iran war, about 20 percent of the world’s oil supplies moved through the strait.
US President Donald Trump made clear during talks with Chinese President Xi Jinping that Chinese help for Iran is unacceptable, US Ambassador to China David Perdue said on Friday. Any agreements to reduce trade tensions between the US and China could boost economic growth and demand for energy.
The US has proposed that the United Arab Emirates host a trilateral meeting with Ukraine and Russia to discuss efforts to end their 4-1/2-year-long conflict.
