Oil prices fall weekly on Hormuz reopening rumors and Venezuela supply talks
Crude benchmarks posted weekly losses as diplomatic efforts to restore Strait of Hormuz traffic and potential US access to Venezuelan reserves offset inflation-driven rate hike concerns.
Brent crude futures settled at $89.31 a barrel, down 39 cents, or 0.43%, while West Texas Intermediate finished at $83.40, down 13 cents. Over the week, Brent dropped more than 5% and WTI declined by over 4%.
The downward pressure intensified following comments from new Federal Reserve Chairman Kevin Warsh, who signaled a possible rate hike later this year to curb inflation. Phil Flynn, a senior analyst at the Price Futures Group, noted that "the (global) products markets are looking strong on further Ukraine strikes on Russian refineries." However, he added that "there is a lot of rumbling, rumors we might see a deal to reopen the Strait of Hormuz over the weekend."
Mediators are actively working to restore normal traffic through the critical waterway. Tehran has agreed to draft conditions for reopening the strait after a Qatari emissary urged respect for freedom of navigation, despite the US recently imposing what it called the "toughest sanctions in history" on Iran.
Actual transit volumes remain volatile. Preliminary shipping data showed only seven commodity vessels passed through the strait on Thursday, well below the 10-day average of 15. Goldman Sachs estimates current total Gulf exports at 15 million to 16 million barrels per day, remaining 7 million to 8 million barrels below pre-war levels.
Alternative Supply and Geopolitical Risks
In a move that could eventually lower import costs, the Trump administration is negotiating long-term access to a portion of Venezuela’s crude reserves. Concurrently, reports indicate Venezuela is considering withdrawing from the OPEC production group.
Broader geopolitical friction continues to complicate the supply outlook. Moscow warned it could target British military assets in response to Ukrainian attacks utilizing British-supplied long-range cruise missiles. However, President Trump dismissed concerns of a Russian strike on a NATO member, downplaying recent warnings issued by CIA Director John Ratcliffe.
The intersection of these factors leaves the market highly sensitive to diplomatic shifts. As PVM Oil Futures analyst John Evans observed, "The ramifications on who will be in or out of OPEC, how China's demand is affected, whether the refinery issues of the globe can now be solved are hitched firmly to this bumpy wagon of war."
