Key Highlights
- Brent crude pushed past $96 per barrel while WTI approached $99 following Saudi confirmation of infrastructure attacks reducing daily output by 600,000 barrels
- Both benchmarks face double-digit weekly declines exceeding 10%, marking the largest weekly retreat since June after Tuesday’s US-Iran ceasefire announcement
- Tehran reimposed restrictions on tanker movements through the Strait of Hormuz following Israeli military operations in Lebanon
- Diplomatic meetings scheduled for Islamabad this weekend face uncertainty as Iran disputes delegation arrival reports
- Major Asian consumers including Japan, China, and India are releasing strategic petroleum reserves to address supply constraints
Crude benchmarks extended their recovery Friday for a consecutive session while remaining positioned for their most significant weekly contraction since early summer, as Middle Eastern supply challenges continued to unsettle global energy markets.
Brent crude surpassed the $96 threshold per barrel, with West Texas Intermediate hovering around $99. Both contracts registered approximately 1% increases during Asian market hours Friday.
Despite Friday’s upward momentum, Brent faces a weekly decline exceeding 11%. WTI mirrors this downturn with comparable percentage losses.
The pronounced weekly contraction followed Tuesday’s ceasefire announcement between Washington and Tehran. Markets initially interpreted the truce as a signal for resuming normal petroleum flows.
The diplomatic landscape shifted rapidly. Israeli military forces conducted strikes on Lebanese territory mere hours after the truce, asserting that operations against Hezbollah fell outside the ceasefire framework.
Tehran’s response included reimposing transit restrictions through the Strait of Hormuz, characterizing Israeli actions as violations of the agreement.
The Strait of Hormuz has experienced near-total closure since late February. This bottleneck affects approximately 20% of worldwide crude oil and liquefied natural gas movements, generating substantial supply constraints across global markets.
Saudi state media verified that recent infrastructure attacks have diminished the kingdom’s production capabilities by roughly 600,000 barrels daily. This reduction represents approximately 10% of typical Saudi crude shipments.
East-West Pipeline Disruption Adds Complexity to Supply Chain
Damage to a critical pumping facility supporting the East-West pipeline reduced throughput capacity by 700,000 barrels this week. The kingdom had been leveraging this conduit to route crude exports through Red Sea terminals, creating an alternative to Hormuz-dependent routes.
“Reduced capacity on the East-West pipeline undermines Saudi Arabia’s strategy for circumventing Hormuz and underscores ongoing supply vulnerabilities,” stated Mohith Velamala, a global oil analyst at BloombergNEF.
Kuwaiti authorities confirmed intercepting aerial drone incursions, with several critical energy installations identified as targets.
Nations heavily dependent on Middle Eastern petroleum are activating reserve stockpiles. Japanese officials plan to discharge approximately 20 days’ worth of oil from strategic holdings in May. Chinese authorities authorized state refineries to access commercial reserve inventories. India’s leading private refinery operator has implemented fuel purchase restrictions at retail stations.
Islamabad Diplomatic Session Draws Market Attention
Traders are monitoring scheduled US-Iran negotiations in Islamabad, where Vice President JD Vance is anticipated to represent the American delegation Saturday.
Iranian news outlets reported Friday that Tehran denies any negotiating team has reached the Pakistani capital. Iranian officials indicated discussions would remain paused pending American adherence to Lebanon ceasefire provisions.
President Trump expressed optimism regarding potential agreement prospects and characterized Iranian leadership as demonstrating greater pragmatism than their public rhetoric indicates.
Trump issued warnings via social media against Iranian attempts to impose transit charges on vessels navigating the Strait of Hormuz.
Iran’s recently appointed supreme leader announced Tehran “will definitely bring the management of the Strait of Hormuz to a new stage,” though specifics regarding this declaration remain ambiguous.
“Markets are returning their attention to the actual flow situation through the Strait of Hormuz, where conditions remain significantly disrupted and rapid normalization appears unlikely,” commented Rebecca Babin, senior energy trader at CIBC Private Wealth Group.
Oil prices have experienced average daily fluctuations exceeding $9 since hostilities commenced, representing the most volatile intraday movements observed in recent years.
