TLDR
- Brent futures rose past $96 per barrel while WTI approached $99 following Saudi confirmation of attacks reducing output capacity by 600,000 barrels daily
- Despite Friday gains, crude is headed for its steepest weekly decline since June, falling over 10% after Tuesday’s US-Iran ceasefire announcement
- Tehran resumed blocking tanker passage through the Strait of Hormuz following Israeli strikes on Lebanon
- Weekend diplomatic talks scheduled in Islamabad face uncertainty as Iran denies US delegation has arrived
- Major Asian consumers including Japan, China, and India are drawing down strategic petroleum reserves to counter supply constraints
Crude oil futures advanced for the second consecutive session Friday, yet remained poised for their most significant weekly decline in months as Middle Eastern supply disruptions continue to unsettle energy markets.
Brent crude futures surpassed $96 per barrel during Asian hours, while West Texas Intermediate approached the $99 mark. Both benchmarks posted approximately 1% gains in Friday trading.
Yet despite these intraday advances, Brent remains over 11% lower for the week. WTI has experienced comparable losses.
The dramatic weekly selloff followed Tuesday’s announcement of a US-Iran ceasefire agreement. Initial market reaction drove prices lower on expectations that petroleum shipments would restart.
However, the diplomatic landscape deteriorated rapidly. Just hours after the truce declaration, Israeli forces conducted military operations in Lebanon, asserting that its confrontation with Hezbollah fell outside the ceasefire framework.
Tehran’s response was swift, reimposing restrictions on tanker transit through the Strait of Hormuz, characterizing Israel’s actions as violations of the agreement.
The strategic waterway has remained largely inaccessible since late February. This obstruction has impacted approximately 20% of worldwide crude oil and liquefied natural gas transportation, triggering significant supply constraints.
Saudi Arabia’s official press service verified that recent attacks on petroleum infrastructure have diminished the nation’s production capabilities by approximately 600,000 barrels daily. This represents roughly 10% of the kingdom’s typical crude exports.
Saudi Pipeline Damage Complicates Supply Picture
Additional strikes targeting a pumping facility on the East-West pipeline reduced throughput by 700,000 barrels this week. The kingdom had been utilizing this pipeline to ship crude through Red Sea terminals, 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 intercepting aerial drone assaults, with several critical installations targeted.
Nations with substantial dependence on Middle Eastern petroleum are now accessing emergency stockpiles. Japan plans to release approximately 20 days’ worth of oil from strategic reserves in May. China authorized state-owned refineries to utilize commercial inventories. India’s leading private refining company has begun limiting fuel sales at retail outlets.
Weekend Talks in Islamabad Under Watch
Market participants are closely monitoring scheduled US-Iran diplomatic discussions in Islamabad, where Vice President JD Vance is anticipated to head the American delegation on Saturday.
Nevertheless, Iranian state media reported Friday that Tehran has denied any negotiating team has reached the Pakistani capital. Iranian officials also indicated discussions would remain suspended until Washington fulfills its Lebanon ceasefire obligations.
President Trump expressed being “very optimistic” about securing an agreement and characterized Iranian leadership as “much more reasonable” than their public rhetoric suggests.
Trump additionally cautioned Iran through social media against imposing transit fees on vessels navigating 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 announcement remained ambiguous.
“The market is returning its attention to the actual situation regarding Strait of Hormuz flows, which remain significantly below normal and are improbable to recover rapidly,” commented 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 volatile daily movements in recent years.
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