Brent and WTI crude both slipped on Friday as traders weighed signs that Iran and Gulf states are nearing a deal to reopen the Strait of Hormuz, a day after prices jumped more than $3 a barrel. Both benchmarks are still on course for a roughly 9% weekly loss, even as Saudi Arabia warns of possible coordinated attacks and Iran presses Gulf states over transit fees.
Brent and WTI both retreat
Brent crude fell 0.7% to $81.92 a barrel on Friday. West Texas Intermediate slipped 0.4% to $76.96, as traders weighed signs that Iran and Gulf states are nearing a temporary arrangement to reopen the Strait of Hormuz.
The pullback follows a rally: futures settled more than $3 a barrel higher on Thursday after Iran reviewed a bill to ban U.S. and Israeli vessels from the strait, the passage that normally carries roughly one-fifth of the world's crude oil and liquefied natural gas. Still, prices had fallen earlier in the week as a resolution looked more likely, and both benchmarks are now on course for a weekly loss of about 9%.
Deal terms remain contested
Analysts say this week's swings show hostilities between Iran and the U.S. are not over. Iran is seeking fees of 5% to 7% of cargo values from ships using the strait, a senior Iranian official said, while Oman is discussing a fee near 3% and Washington wants none at all. Four industry sources said the arrangement is not easily workable because of U.S. sanctions and restrictive insurance clauses on payments.
Bjarne Schieldrop at SEB Research said the Iran-Oman framework, in its current form, hands Iran more leverage than Washington can accept politically. According to Reuters: "Trump would face heavy political criticism at home if he did." Vandana Hari of Vanda Insights said the market still does not know what needs to happen for an agreement to be clinched.
Saudi Arabia braces for possible attacks
Saudi Arabia expects coordinated attacks from Iraqi militias to its north and Yemen's Houthis to its south, under the supervision of Iran's Revolutionary Guard Corps, a senior Saudi official said. Intelligence from Saudi Arabia, the United States and other regional countries points to potential targets including energy infrastructure, ports and airports, the official said. The Houthis said they carried out missile and drone attacks on Saudi deployments in Marib and Hadramout on Thursday.
Trump told reporters on Thursday he believed the war would end soon. Meanwhile, investors are awaiting U.S. payrolls data due later on Friday, which could signal the Federal Reserve's thinking on rates; higher rates raise consumer costs, which can weigh on economic growth and oil demand.
Source: Reuters (via Investing.com)
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