Oil prices set for sharp weekly drop as Trump signals Iran talks progress

Oil prices fell on Friday and were on track for the steepest weekly decline in six months after US President ​Donald Trump said talks to end the war with Iran ​were going well and that he would pause attacks on the country's ‌energy plants for 10 days.

Brent futures fell 84 cents, or 0.8 per cent, to $107.17 per barrel as of 0353 GMT, while US West Texas Intermediate futures lost $1.02, or 1.1 per cent, to $93.46 per barrel, trimming gains from a bullish previous session.

Both benchmarks were trading 4.6 per cent lower on a weekly basis despite the Brent rising 5.7 per cent and WTI gaining 4.6 per cent on Thursday on fears of further escalation of the war.

 

"Despite talks of de-escalation, oil is trading on war longevity, not just headlines. Any direct damage to oil infrastructure or prolonged conflict could ‌force markets to rapidly reprice higher," said Priyanka Sachdeva, analyst at Phillip Nova.

While Trump announced a pause on attacks on Iran's energy infrastructure, the US has also sent thousands of troops to the Middle East, with Trump weighing whether to use ground forces to seize Iran's strategic oil hub of Kharg Island.

An Iranian official told Reuters that a 15-point US proposal, conveyed to Tehran by Pakistan, ​was "one-sided and unfair".

The war has taken 11 million barrels of oil per day out of ‌global supply, with the International Energy Agency describing the crisis as worse than the two oil shocks of the 1970s and the Russia-Ukraine war ​on gas ‌put together.

Analysts at Macquarie Group said if the war begins to wind downsoon, ‌oil prices will fall quickly in coming months, but still remain at pre-conflict levels. However, prices could rise to $200 if the war drags on until end ‌of ​June, they said.

"With ​each passing day, market pressure is building. Asian countries are tapping buffer stocks and weighing demand adjustments," said Mukesh Sahdev, founder & CEO of ‌Australia-based consultancy XAnalysts.