Global oil benchmarks posted their second straight weekly loss on Friday in a volatile week marked by shifting US-Iran tensions, stalled Strait of Hormuz navigation talks, and an OPEC+ decision to lift production quotas for September.
West Texas Intermediate settled at $77.08 per barrel, down from $86.80/bbl the previous week, while Brent closed at $82.35/bbl, down from $90.09/bbl a week earlier.
While WTI futures shed 7.7% over the week, Brent lost 8.6%.
The week opened under downward pressure following reports that President Donald Trump had held off on new military strikes against Iran, triggering optimism over potential de-escalation.
Hopes were further fueled by discussions between Iran and Oman regarding a framework to reopen commercial shipping through the Strait of Hormuz.
However, market sentiment quickly turned skeptical as talks hit roadblocks.
Conflicting stances emerged when Iranian state media and officials clarified that any navigation deal would not immediately reopen the vital waterway, outlining strict conditions, such as barring specific vessels and proposing heavy cargo passage fees or tolls.
According to Reuters, a senior Iranian official said Iran wants to charge ships 5% to 7% of their cargo value to use the strait. Oman is looking at a 3% fee, but Washington is pushing for free passage with no fees, the report added.
Physical transit through the corridor remained severely constrained due to heightened security risks, vessel inspections, and reported strikes on targets within the strait.
Amid the transit chaos, eight major international shipping associations submitted a joint petition to the United Nations and International Maritime Organization, warning that any compulsory transit tolls violate international law.
"The absence of US and Iranian consensus paired with a cessation of military actions around the strait could render any agreement without core long-term utility, even if it can limit incidents of targeting ships such as those that were trying to exit through Omani waters," said Samer Hasn, Senior Market Analyst at XS.com.
On the supply front, core OPEC+ members approved a production quota increase of about 188,000 barrels per day for September, completing the phased unwinding of voluntary cuts.
Despite the quota increase, analysts noted that physical delivery remains hindered by regional blockades and infrastructure bottlenecks.
Meanwhile, Ukrainian drone strikes targeted the Caspian Pipeline Consortium terminal on Russia's Black Sea coast and regional oil refineries, prompting Moscow to extend its domestic diesel export ban through Sept. 1.
In response to shifting trade flows and competitive pressures, Saudi Arabia lowered its official selling prices for September loadings, cutting Arab Light for Asian buyers by $0.50 to $2/bbl below benchmark averages.
Domestic inventory data added further bearish weight mid-week, with the American Petroleum Institute and the US Energy Information Administration reporting an increase of 2.5 million barrels and 2.7 mmbbls in US commercial crude inventories for the week ending July 31, respectively.
The US oil rig count increased by three from 451 the previous week to 454 in the week ending Aug. 7, according to data from Baker Hughes (BKR) released Friday. The US had 411 oil rigs in operation a year earlier.
The consolidated North American oil and gas rig count, a key early indicator of future production levels, decreased by three to 804 from 807 the previous week.
Money managers in the WTI crude futures and options markets remained net long in the week ended Aug. 4, according to the Commodity Futures Trading Commission's latest Commitments of Traders report released on Friday.
The data showed that money managers reported 191,726 long positions, down 3,309 from July 28, while short positions were up 3,948 to 90,676. Their net long position fell by 7,257 contracts to 101,050.