Oil prices moved lower in Asian trade on Friday and were heading for a weekly decline after U.S. President Donald Trump said he had canceled planned military strikes against Iran and suggested that a diplomatic resolution was near.
As of 20:04 ET (00:04 GMT), Brent Oil Futures expiring in August fell 1.5% to $89.05 per barrel, while West Texas Intermediate (WTI) crude futures slipped 1.6% to 86.34 per barrel.
Both benchmarks had fallen nearly 3% on Thursday and were on course for weekly losses exceeding 4% as market participants unwound part of the geopolitical risk premium that had been priced into crude amid recent hostilities.
Market sentiment improved after Trump said discussions with Iran had reached the highest levels of leadership and that a deal was nearing completion, prompting him to call off planned strikes. He also said Washington and Tehran could sign a peace deal as soon as this weekend that would reopen the Strait of Hormuz to shipping.
Those comments represented a marked change from earlier threats of military action that had raised concerns about potential supply disruptions from the Gulf region. Prices that had advanced on fears of escalation earlier in the week gave way as traders reassessed the likelihood of sustained disruption.
Despite the slide in crude benchmarks, caution persisted in markets after Iran stated it had not reached a final conclusion on the matter. Market participants remained alert to the possibility that any setback in negotiations could quickly restore supply concerns and push prices higher.
Limiting the downturn, U.S. government data published this week showed crude inventories fell by 7.2 million barrels, a drawdown that far exceeded expectations and indicated solid demand in the world's largest oil consumer. The inventory fall was the seventh consecutive weekly decline in U.S. crude stocks.
For the week overall, oil prices were poised to finish lower after Thursday's sharp selloff outweighed gains recorded earlier in the week when escalation fears had driven crude higher.
Summary: Oil dropped in Asian trading after U.S. President Donald Trump called off planned strikes on Iran and signaled a near-term diplomatic agreement. Brent and WTI declined, traders pared the geopolitical risk premium, and U.S. crude stocks posted a sizeable weekly drawdown that indicates robust demand.
Key points:
- Brent fell 1.5% to $89.05 per barrel; WTI slipped 1.6% to 86.34 per barrel as of 20:04 ET (00:04 GMT).
- Both benchmarks lost nearly 3% on Thursday and were on track for weekly declines of more than 4% as geopolitical risk was unwound.
- U.S. crude inventories dropped by 7.2 million barrels, marking the seventh straight weekly decline and signaling strong demand in the United States.
Risks and uncertainties:
- Negotiations could falter - any setback in talks between Washington and Tehran could rapidly revive supply concerns and push oil prices higher.
- Uncertainty from Iran - Iran's statement that it had not reached a final conclusion keeps traders cautious, leaving the market vulnerable to renewed volatility.