Oil prices remained relatively stable on Friday, following significant declines in the prior session. This stability comes amid diminishing expectations for a swift resolution to the U.S.-Israeli conflict with Iran, particularly after Hezbollah dismissed a new ceasefire proposal in Lebanon. Brent crude futures declined by 21 cents, representing a decrease of 0.22%, settling at $95.24 per barrel, following a drop of 2.84% on Thursday. U.S. West Texas Intermediate crude eased 10 cents, or 0.11%, to $92.94 a barrel, following a 3.1% decline in the previous session. Despite the recent pullback, both benchmarks are still positioned to achieve their first weekly gain in three weeks. WTI has advanced more than 6% this week as tensions in the Middle East intensified, U.S.-Iran peace negotiations continued without a breakthrough, and shipping through the Strait of Hormuz, which handles roughly a fifth of global oil flows, remained constrained.
On Thursday, Hezbollah leader Naim Qassem dismissed a U.S.-brokered agreement between Israel and the Lebanese government that sought to resolve the ongoing conflict. Iran has conditioned any peace agreement with Washington on the establishment of a ceasefire in Lebanon. U.S. President Donald Trump stated on Thursday that he perceived advancements occurring between Israel and Lebanon, asserting that Lebanon merited peace. Meanwhile, OPEC persists in upholding its projection for oil demand growth at 1.2 million barrels per day for the current year. Secretary General Haitham Al Ghais reiterated the outlook on Thursday, undeterred by the ongoing Middle East conflict and the closure of the Strait of Hormuz.
Haitong Futures indicated that crude prices may approach the upper limit of their trading range, as the convergence of tightening supply-demand dynamics aligns with a significant reduction in global oil inventories, according to a report. Analysts observed that, even in the event of a ceasefire, it could take months for shipping activity through the Strait of Hormuz to normalise. Any damage to energy infrastructure could further delay the recovery, they added. Last month, Saudi Aramco Chief Executive Officer Amin Nasser cautioned that disruptions in the Strait of Hormuz could postpone stability in global oil markets until 2027. He stated that extended disruptions could affect almost 100 million barrels of oil supply on a weekly basis. Saudi Aramco continues to hold the position as the largest oil producer globally.
Morgan Stanley characterised the oil market as being in “a race against time,” warning that elements that have thus far mitigated a more pronounced increase in crude prices could start to diminish if the Strait of Hormuz remains closed through June. The broking observed that robust U.S. crude exports, coupled with diminished demand from China, have contributed to mitigating a portion of the supply shock. However, it cautioned that a sustained interruption to the critical shipping lane could once more constrict global supplies if the shutdown persists beyond the timeframe in which the U.S. and China are able to mitigate the effects.