New York — Oil prices fell on Friday as traders weighed indications of potential diplomatic progress between the United States and Iran against renewed threats to Saudi Arabia’s energy infrastructure.
Brent crude declined 40 cents, or 0.4%, to $106.20 a barrel by 0821 GMT. West Texas Intermediate crude dropped $1.02, or 1.1%, to $93.59 a barrel. Despite the declines during the session, Brent was still 2.2% higher for the week, while WTI was down 6.8%.
Markets have been closely monitoring discussions between U.S. and Iranian negotiators in New York. People familiar with the talks said the two sides were considering a phased path out of the conflict that could involve Iran reopening the Strait of Hormuz and Washington lifting its economic blockade of Iran.
The possibility of a diplomatic breakthrough has offered some relief to oil markets following months of supply disruptions. Since the war began at the end of February, roughly one-fifth of global oil and gas shipments have been curtailed, according to the Reuters report.
However, fresh threats to supply continue to weigh on the market. Saudi Arabia said it had intercepted six ballistic missiles fired by Yemen’s Iran-backed Houthis. The missiles targeted locations including Taif and the Yanbu region along the Red Sea, according to the Saudi-led coalition in Yemen.
Saudi Arabia has also been boosting crude flows through its East-West Pipeline toward Yanbu. Oil tanker loadings at the Red Sea export hub had not resumed, based on industry sources, satellite imagery and shipping data cited by Reuters.
The competing supply and diplomatic developments have contributed to an unusual widening between the two major oil benchmarks. The Brent-WTI spread reached $12.59 a barrel, its widest point since May.
Analysts said differing market conditions were largely responsible for the gap. Brent continues to reflect a geopolitical premium linked to restricted Gulf supplies, while higher U.S. production and inventories are putting pressure on WTI.
Concerns that the United States could limit diesel exports are also influencing the market. Such restrictions could boost fuel availability domestically while reducing demand for U.S. crude and refined products in overseas markets.
Oil prices had climbed as much as 5% on Thursday, reaching their highest level in a week, before giving up those gains and moving lower on Friday.
Developments in U.S.-Iran diplomacy and the security situation around Saudi Arabia remain key factors for energy markets. Progress toward reopening the Strait of Hormuz could ease supply concerns, while additional attacks on Gulf energy infrastructure could increase pressure on supplies.
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