Oil Slides 3% as US-Iran Truce Hopes Offset Houthi Supply Fears
Crude prices fell about 3% on hopes of a phased US-Iran deal, while Houthi strikes on Saudi Arabia and diesel export ban talk kept traders cautious.
Oil prices dropped roughly 3% on Friday as expectations grew that the United States and Iran could find a way out of their conflict, though traders remained wary of supply disruptions caused by repeated Houthi attacks on Saudi Arabia.
Brent futures were down $2.96, or 2.8%, at $103.64 a barrel by mid-afternoon in New York, while West Texas Intermediate fell $2.86, or 3.0%, to $91.75. For the week, Brent was about 1% lower and WTI roughly 9% weaker.
Negotiators from Washington and Tehran, meeting in New York, are discussing a phased arrangement under which Iran would reopen the Strait of Hormuz and the US would lift its economic blockade, according to sources close to the talks.
"Diplomatic hopes are essentially helping oil prices weather the latest military strikes in the Middle East, with crude trading moderately softer despite the attacks," said Tim Waterer, chief analyst at KCM Trade.
At the same time, military chiefs from Saudi Arabia, Turkey and Pakistan are set to discuss support for Riyadh as it faces attacks by Yemen's Iran-aligned Houthis. The Houthis have struck the Saudi-backed government in Yemen and repeatedly fired into Saudi Arabia, disrupting oil flows from the world's largest energy exporter. The wider conflict began with US and Israeli strikes on Iran on February 28.
Ship-tracking data from Kpler showed crude flows out of the Strait of Hormuz reached 33.7 million barrels in the week starting September 20, roughly in line with the previous week. The traffic included 19 tankers, 17 of them very large crude carriers capable of carrying 2 million barrels each. Most were loaded with Saudi crude, followed by Iraqi oil. Before the Iran war, about 20% of global oil supplies passed through the strait.
In the US, talk of a possible diesel export ban is widening the gap between US crude futures and the global Brent benchmark, signalling that markets expect American refiners to process less crude if their diesel output cannot be exported. On Thursday, Brent's premium over WTI rose to its highest since May for a second straight day.
Separately, US Ambassador to China David Perdue said President Donald Trump made clear during talks with Chinese President Xi Jinping that Chinese assistance to Iran is unacceptable. Any agreements to ease US-China trade tensions could support economic growth and energy demand.
On the Russia-Ukraine front, Ukrainian President Volodymyr Zelenskiy said the US has proposed that the United Arab Emirates host a trilateral meeting with Ukraine and Russia to discuss ending their four-and-a-half-year war. A drone attack damaged Russia's Novoshakhtinsk oil refinery, forcing a temporary halt to operations, according to Governor Yuri Slyusar. The strikes followed discussions at UN headquarters in New York on a possible energy-related ceasefire between Kyiv and Moscow. Any deal to end the war could allow Russia, an OPEC+ member and the world's third-biggest crude producer in 2025, to export more energy.