Oil futures fell 2% on Friday and were on track for their steepest weekly decline since early April after reports that the U.S. and Iran had reached agreement on a potential ceasefire extension.
Brent crude futures for July, which expire later on Friday, were down $1.89, or 2%, at $91.82 a barrel by 1309 GMT. The more active August contract was down $1.89, or 2%, at $90.81. WTI U.S. oil futures were down $1.70, or 1.9%, at $87.20.
The Brent benchmark has plunged by about 11% this week for its steepest weekly decline in seven. WTI, meanwhile, has dropped by nearly 10% for its biggest weekly loss in six. Both benchmarks hit their lowest price since mid-April.
“While oil flows through the Strait of Hormuz remain restricted and oil inventories keep falling, the market focus remains on the possibility of a deal between the U.S. and Iran,” said UBS analyst Giovanni Staunovo.
“The price drop could be forcing some market players to close their long positions.”
The U.S. and Iran reached an agreement on Thursday to extend a ceasefire and lift restrictions on shipping through the Strait of Hormuz, sources told Reuters, though U.S. President Donald Trump has yet to approve the deal and Iranian state media said it had not been finalised.
Prices have been volatile in recent sessions, swinging by as much as $6 for both benchmarks on conflicting signals over a possible end to the Iran war and potential reopening of the Strait of Hormuz, which was previously a conduit for a fifth of the world’s oil and liquefied natural gas supplies.
Traffic through the maritime chokepoint remains a small fraction of levels before the conflict. Analysts at ING said a reopening of the waterway would offer some immediate relief to the oil market, but a recovery is still uncertain.
Japan, which relies heavily on oil from the Middle East, last month registered a 66% drop in crude oil imports compared with April last year.
Commerzbank raised its Brent forecasts to $90 a barrel by the end of September and $85 by the end of the year, based on a scenario in which the Strait of Hormuz is expected to remain closed to normal shipping for another two months.
Meanwhile U.S. crude, gasoline and distillate stockpiles fell last week, the Energy Information Administration said on Thursday, as demand from refiners and consumers rose and exports fell by 1.16 million barrels per day to 4.4 million bpd.