SINGAPORE: Oil prices eased on Friday despite geopolitical tensions, as fresh US sanctions on Iran were seen as part of a broader diplomatic effort to avoid further escalation in the Middle East.
Brent crude futures fell $1.84, or 2.33 per cent, to close at $77.01 a barrel. US West Texas Intermediate (WTI) crude for July delivery, which expires on Friday, dipped 21 cents, or 0.28 per cent, to $74.93. The more actively traded August contract settled at $73.84.
Despite the drop, Brent posted a 3.6 per cent weekly gain, while front-month WTI rose 2.7 per cent.
The US Treasury Department announced new sanctions targeting at least 20 entities, five individuals and three vessels linked to Iran, including two firms based in Hong Kong. The move comes a day after former President Donald Trump said he might take up to two weeks to decide on US involvement in the ongoing conflict between Israel and Iran.
Analysts viewed the sanctions as a signal that Washington may be pursuing a diplomatic resolution rather than a military response. “Those sanctions are cutting both ways. They appear to be part of a negotiation strategy,” said John Kilduff of Again Capital in New York.
While Iran has previously threatened to block the Strait of Hormuz, a crucial channel for global oil shipments — there has been no disruption to oil exports so far. UBS analyst Giovanni Staunovo said oil prices will now hinge on whether any supply interruptions occur.
Ashley Kelty, an analyst at Panmure Liberum, warned that if the situation escalates, for example, through Israeli strikes on Iranian export infrastructure or Iranian interference in shipping lanes, oil prices could spike to $100 a barrel.
In a separate development, Bloomberg reported that the European Union has dropped its proposal to reduce the price cap on Russian oil to $45.
Meanwhile, US energy firms cut the number of oil and gas rigs for the eighth consecutive week,mthe longest such stretch since September 2023, according to data from Baker Hughes.
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