Oil retreated on prospective Hormuz transit talks but secures 8% weekly surge
Global crude oil futures retreated on Friday as reports of regional diplomatic efforts to ease Persian Gulf maritime tensions triggered profit-taking, though severe disruptions across key pipeline networks and maritime chokepoints preserved substantial weekly gains.
Global crude oil futures retreated on Friday as reports of regional diplomatic efforts to ease Persian Gulf maritime tensions triggered profit-taking, though severe disruptions across key pipeline networks and maritime chokepoints preserved substantial weekly gains.
International benchmark Brent crude fell $3.02, or 2.81%, to settle at $104.61 a barrel. US West Texas Intermediate (WTI) crude dropped $2.43, or 2.37%, to close at $100.05 a barrel.
Despite retreating from intraday peaks not seen since mid-May, both contracts secured weekly advances exceeding 8%, reinforced by Thursday’s 6% surge.
Early gains unwound following reports that Middle Eastern foreign ministers are attempting to broker a temporary transit agreement with Tehran to manage commercial traffic through the Strait of Hormuz, where daily commodity passages slipped to seven on Thursday. Downward pressure was reinforced by European Central Bank policymakers signaling potential interest rate hikes if energy costs rekindle broader inflation.
However, the pullback was heavily cushioned by physical supply shocks. Houthi strikes damaged a critical pumping station on Saudi Arabia’s East-West Pipeline, compromising up to 7 million barrels per day of bypass export capacity away from Hormuz. Upstream tightness was underscored by IEA data revealing Saudi crude production plummeted by 2.3 million barrels per day in August to a three-decade low of 6 million bpd, while Houthi forces advanced toward Perim Island in the Bab el-Mandeb Strait, threatening Red Sea shipping corridors.
Meanwhile, refined products remained acutely tight, with US retail diesel crossing $6 per gallon for the first time amid severe Russian and Middle Eastern refinery outages. Distillate shortages prompted Commerzbank to raise its year-end Brent forecast to $85 a barrel and diesel to $1,200 a ton, sustaining relentless cost-push margin pressure across downstream petrochemical cracking operations.
Written by: Aiman Haikal