TLDR
- Brent crude surpassed $96 per barrel while WTI approached $99 following Saudi confirmation that strikes reduced output capacity by 600,000 barrels daily
- Crude benchmarks are heading toward their sharpest weekly decline since June, falling over 10% despite a US-Iran ceasefire announcement Tuesday
- Tehran once again blocked tanker movements through the Strait of Hormuz following Israeli strikes on Lebanon
- Diplomatic discussions between Washington and Tehran scheduled for Islamabad this weekend, though Iran has denied arrival of negotiators
- Major Asian economies including Japan, China, and India are releasing strategic petroleum reserves to address supply constraints
Crude oil benchmarks posted gains for the second consecutive session Friday while remaining positioned for their sharpest weekly decline in three months as Middle Eastern supply uncertainties continue rattling energy markets.
Brent crude pushed past the $96 per barrel threshold while West Texas Intermediate hovered around $99. Both benchmark contracts registered approximately 1% increases during Asian trading hours Friday.
Notwithstanding Friday’s upward movement, Brent remains poised for an 11%-plus weekly retreat. WTI has experienced comparable percentage losses.
The dramatic weekly selloff followed Tuesday’s announcement of a US-Iran ceasefire. Initial market reaction pushed crude values downward on expectations that regional oil shipments would normalize.
Yet complications emerged rapidly. Israeli military operations targeted Lebanese territory within hours of the truce declaration, with Tel Aviv stating its Hezbollah operations fell outside ceasefire parameters.
Tehran’s response involved reimposing tanker transit restrictions through the Strait of Hormuz, characterizing Israel’s actions as ceasefire violations.
The strategic waterway has experienced near-total closure since late February. These disruptions have impacted approximately 20% of worldwide crude oil and liquefied natural gas shipments, triggering significant supply constraints.
Saudi Arabia’s official press service verified that infrastructure attacks have diminished the kingdom’s production capabilities by approximately 600,000 barrels daily. This represents roughly 10% of its standard crude export volume.
Saudi Pipeline Damage Complicates Supply Picture
Attacks targeting a critical pumping station along the East-West pipeline reduced weekly throughput by 700,000 barrels. Saudi Arabia 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 has similarly reported intercepting drone incursions, with several critical infrastructure sites being targeted.
Nations heavily dependent on Middle Eastern petroleum imports are now accessing emergency stockpiles. Japan plans to release approximately 20 days’ worth of oil from strategic reserves during May. Chinese authorities authorized state-controlled refineries to utilize commercial reserve holdings. India’s leading private refiner has implemented fuel purchase restrictions at retail locations.
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 Saturday.
Nevertheless, Iranian state media reported Friday that Tehran has denied any negotiating team has reached the Pakistani capital. Iranian officials additionally stated diplomatic engagement would remain frozen until Washington honors Lebanon ceasefire obligations.
President Trump expressed being “very optimistic” regarding potential agreement prospects and characterized Iranian leadership as “much more reasonable” than their public rhetoric indicates.
Trump additionally issued warnings via social media against Iran implementing transit fees for vessels navigating the Strait of Hormuz.
Iran’s new supreme leader announced Tehran “will definitely bring the management of the Strait of Hormuz to a new stage,” though the precise implications of that declaration remain ambiguous.
“The market is refocusing on the reality of flows through the Strait of Hormuz, which remain far from normalized and are unlikely to snap back quickly,” said Rebecca Babin, senior energy trader at CIBC Private Wealth Group.
Oil prices have experienced average daily volatility exceeding $9 since conflict escalation began, representing the most extreme daily fluctuations witnessed in recent years.
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