TLDR
- Brent crude rose past $96 per barrel, with WTI approaching $99, following Saudi confirmation that attacks reduced output capacity by 600,000 barrels daily
- Crude remains headed for its sharpest weekly decline since June, falling more than 10% after Tuesday’s announcement of a US-Iran ceasefire
- Iran blocked tanker passage through the Strait of Hormuz once more following Israeli strikes on Lebanon
- Weekend diplomatic discussions between the US and Iran scheduled for Islamabad, though Iran disputed that delegates had arrived
- Japan, China, and India are releasing emergency petroleum reserves to address supply constraints
Crude oil markets posted gains for the second consecutive session Friday, yet continued trending toward their most significant weekly decline in three months as Middle Eastern supply challenges maintained market volatility.
Brent crude advanced beyond $96 per barrel during Friday trading, with West Texas Intermediate hovering around $99. Both benchmarks recorded approximately 1% increases during Asian market hours.
Notwithstanding Friday’s uptick, Brent has declined more than 11% across the week. WTI experienced comparable losses.
The substantial weekly decline followed Tuesday’s ceasefire announcement between Washington and Tehran. That development initially drove prices downward on expectations that petroleum flows might normalize.
However, conditions deteriorated rapidly. Just hours after the truce declaration, Israel conducted military operations in Lebanon, asserting its confrontation with Hezbollah fell outside the ceasefire framework.
Tehran retaliated by once again blocking tanker movement through the Strait of Hormuz, characterizing Israel’s actions as violating the agreement.
The Strait of Hormuz has remained largely inaccessible since late February. This blockage has impacted approximately one-fifth of worldwide oil and liquefied natural gas transportation, triggering a substantial supply crisis.
Saudi Arabia’s official press agency verified that strikes on energy facilities have diminished the nation’s production capabilities by roughly 600,000 barrels daily. This represents approximately 10% of its typical crude shipments.
Saudi Pipeline Damage Complicates Supply Picture
Attacks on a pumping facility connected to the East-West pipeline additionally reduced capacity by 700,000 barrels this week. Saudi Arabia had relied on this pipeline for crude exports through the Red Sea, circumventing the Strait of Hormuz.
“The reduction in East-West pipeline capacity undermines Saudi Arabia’s Hormuz bypass approach and underscores ongoing supply vulnerabilities,” stated Mohith Velamala, a global oil analyst at BloombergNEF.
Kuwait similarly reported neutralizing drone strikes, with critical infrastructure among the targets.
Nations heavily dependent on Middle Eastern petroleum are now accessing strategic reserves. Japan plans to release approximately 20 days’ worth of oil from stockpiles in May. China authorized state-owned refineries to utilize commercial reserves. India’s leading private refiner has begun limiting fuel purchases at retail locations.
Weekend Talks in Islamabad Under Watch
Market participants are closely monitoring scheduled US-Iran negotiations in Islamabad, where Vice President JD Vance is anticipated to head the American delegation on Saturday.
Nevertheless, Iranian news outlets reported Friday that Tehran refuted claims that a negotiating team had arrived. Iran additionally stated that discussions would remain paused until Washington fulfills obligations regarding the Lebanon ceasefire.
President Trump expressed being “very optimistic” about securing an agreement and characterized Iranian leadership as “much more reasonable” than their public rhetoric indicates.
Trump also cautioned Iran through social media against imposing fees on vessels transiting the Strait of Hormuz.
Iran’s new supreme leader declared Iran “will definitely bring the management of the Strait of Hormuz to a new stage,” though the precise implications of that declaration remained ambiguous.
“The market is redirecting attention to the actual situation of flows through the Strait of Hormuz, which remain significantly below normal and are unlikely to recover rapidly,” noted Rebecca Babin, senior energy trader at CIBC Private Wealth Group.
Oil prices have fluctuated by an average exceeding $9 daily since hostilities commenced, representing the most extreme daily volatility in recent years.
