Oil prices declined to clinch a two-month low on Friday after U.S. President Donald Trump chalked off plans for military strikes on Iran, easing concerns over a further escalation in tensions after both sides exchanged attacks earlier this week.
Brent crude futures fell $1.21, or 1.3%, to $89.17 a barrel, while U.S. West Texas Intermediate (WTI) crude dropped $1.23, or 1.4%, to $86.48 a barrel. Brent crude fell nearly 2% at the open to as low as $88.79 per barrel after settling at a two-month low in the previous session. US West Texas Intermediate (WTI) crude traded near $86 a barrel.
Crude oil price on June 12
Brent crude futures fell $1.21, or 1.3%, to $89.17 a barrel, while U.S. West Texas Intermediate (WTI) crude dropped $1.23, or 1.4%, to $86.48 a barrel.
In a post on Truth Social, Trump said he had called off the strikes after discussions with Iran were elevated to the highest levels of the Iranian leadership and received approval. He said key points of a proposed agreement had been approved "in both concept and great detail" by parties including the United States, Israel, Saudi Arabia, the UAE, Qatar, Turkey, Pakistan, Bahrain, Kuwait, Jordan and Egypt, among others.
Trump added that the naval blockade would remain in place until the proposed transaction is finalized, with the time and location for signing to be announced later. Iran's semi-official Fars news agency, however, reported that Tehran had not approved the text of any agreement.
On Wednesday, Iran announced the closure of the Strait of Hormuz and warned that any vessel attempting to pass through the waterway would come under fire. The blockade, which has been in place for months, has kept oil prices elevated as the strait typically handles about a fifth of global oil and liquefied natural gas shipments.
Despite the closure, the U.S. military said that commercial vessels continued to transit the waterway.
Where are prices headed?
Haitong Futures said crude prices could move toward the upper end of their trading range as tightening supply-demand conditions coincide with a rapid decline in global oil inventories.
Analysts also said that even if a ceasefire is reached, shipping activity through the Strait of Hormuz could take months to return to normal. Any damage to energy infrastructure, they added, would likely prolong the recovery process further.
Nuvama Institutional Equities said an extended shutdown of the Strait of Hormuz could disrupt nearly 20 million barrels per day of crude flows globally. In such a scenario, the brokerage said oil prices could potentially climb to between $110 and $150 a barrel.
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