Oil Prices Dip Amid US-Iran Diplomacy and Diesel Export Fears
Global oil prices saw a nearly 2% decline on Friday, influenced by growing hopes for a US-Iran agreement and potential US restrictions on diesel exports. This dip occurred despite concerns over escalating Houthi attacks in Saudi Arabia potentially disrupting Middle Eastern supply.
Brent crude settled down $2.28 at $104.32 a barrel, while West Texas Intermediate (WTI) fell $2.20 to $92.41. Over the week, Brent gained less than 1%, whereas WTI dropped about 8%.
Sources close to the negotiations indicated that US and Iranian negotiators in New York are exploring a phased approach to end the conflict. This potential deal includes Tehran reopening the Strait of Hormuz and Washington lifting economic sanctions on Iran. However, a senior Iranian official stated that Iran would not compromise on its nuclear program, even if the US agrees to reopen the Strait of Hormuz, which involves lifting the US naval blockade on Iranian ports.
Energy consultancy Rystad Energy noted that the energy sector is under pressure from the potential US diesel export ban and diplomatic progress regarding the Strait of Hormuz. The prospect of a US diesel export ban is widening the gap between US crude and Brent futures, suggesting US refineries might process less crude if diesel exports are curtailed.
Meanwhile, Saudi Arabia is set to convene with military leaders from Turkey and Pakistan to discuss supporting the Kingdom against Houthi attacks. The Houthi conflict, which has targeted Saudi infrastructure, is part of a broader regional war that began with US and Israeli strikes on Iran on February 28.
In a separate development, Ukrainian President Volodymyr Zelensky announced that the US proposed a trilateral meeting in the UAE with Ukraine and Russia to discuss ending their four-and-a-half-year conflict. Russian President Vladimir Putin stated that proposals for a settlement remain on the table, but Moscow needs to assess its interests. Separately, a drone attack damaged the Novoshakhtinsk oil refinery in Russia's Rostov region, forcing a temporary halt in operations. These attacks on Russian refineries followed discussions at the UN regarding a potential energy ceasefire between Kyiv and Moscow.
