West Texas Intermediate (WTI), the US crude oil benchmark, declined to around $90.85 during early Asian trading hours on Friday, marking mild losses after three consecutive days of gains. This drop comes despite heightened geopolitical tensions in the Middle East, including warnings from Iran’s Foreign Minister Abbas Araghchi that the Strait of Hormuz is within Iranian and Omani territorial waters and that US bases in the region remain targets for retaliation. Additionally, Israeli Defence Minister Israel Katz stated that Israel will continue operations in Lebanon despite a ceasefire, preventing displaced Lebanese residents from returning [1].
US President Donald Trump indicated on Wednesday that Iran is “pretty close” to signing a peace agreement with the US, suggesting that “it could happen over the weekend.” The prospect of diplomatic progress appears to have tempered oil price gains, even as regional risks persist [1].
On the supply side, US crude oil inventories saw a significant decline last week. The US Energy Information Administration (EIA) reported a drop of 7.974 million barrels for the week ending May 29, compared to a 3.327 million barrel decrease the previous week and a market consensus of a 4.0 million barrel drawdown [1].
OPEC Secretary General Haitham Al Ghais commented that the organization expects robust oil demand growth and is not adjusting its estimates despite the Middle East conflict and the closure of the Strait of Hormuz. He emphasized that investments in the oil industry should not be affected by "one-off events" occurring anywhere in the world [1].
CONCLUSION
Despite escalating geopolitical risks and a sharp drop in US crude inventories, WTI prices retreated below $91, reflecting market optimism about potential US-Iran diplomatic progress. OPEC maintains a positive outlook on oil demand and urges continued investment in the sector, suggesting that the market is currently discounting short-term disruptions.