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US Oil Update: Crude Dips After Washington Signals Peace Breakthrough

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Crude futures were headed for a weekly decline on Friday following US President Donald Trump's announcement of a potential war-ending settlement with Tehran and the cancellation of scheduled military strikes.

Front-month West Texas Intermediate crude futures declined 2.9% to $85.14 per barrel hitting their lowest since April, while Brent futures retreated by 2.6% to $87.99/bbl to hit its lowest since March.

"Oil prices fell to a multi-month low on Friday and were on track to close the week lower as optimism surrounding a potential agreement between the United States and Iran continued to reduce geopolitical risk perceptions," said Abdelaziz Albogdady, market research and fintech strategy manager at FXEM.

"However, market participants could remain cautious while conditions remain tight in the physical market. Even if a political agreement is reached, restoring shipping activity and energy logistics across the Gulf is likely to take time, limiting the pace of any sustained decline in oil prices in the near-term," Albogdady said.

Meanwhile, Iran's state-backed news agency, IRNA, reported that the future administration and security of the critical Strait of Hormuz chokepoint would ultimately be handled as a regional matter through dialogue and joint decision-making between Tehran and Oman.

ING analysts said, "The price action in oil markets is no surprise, with Brent falling below $90/bbl on the latest developments. The relatively benign price action in recent weeks masks the scale of the supply disruptions from the Persian Gulf."

"We believe the market reaches an inflection point in late July if we do not see oil flows resuming before then. This is when inventory levels and seasonally stronger demand push prices significantly higher towards $120-130/bbl," ING analysts added.

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