Oil Prices Slide as US-Iran Talks Show Tentative Progress

Oil prices fell on Friday as traders grew optimistic about progress in talks between the US and Iran to reopen the Strait of Hormuz, a critical energy shipping route. West Texas Intermediate futures declined by around 2.3% to settle near $92 a barrel, marking its first weekly drop since late August.

The negotiations aim to see Tehran reopen the strait and Washington lift its blockade of Iranian ports. However, previous attempts at a breakthrough have failed, leaving traders cautious about shifting their positions until they see a meaningful increase in supplies.

Emily Ashford, head of energy research at Standard Chartered Bank, warned that even if a deal is reached, it won't immediately restore disrupted flows or boost dwindling inventories. She noted that the physical markets suggest there's a tight supply situation, with Brent's prompt spread widening to nearly $7 a barrel and record premiums paid for prompt barrels in Cushing, Oklahoma.

Despite these concerns, some analysts believe that refiners will receive their allotted barrels soon, potentially leading to a fade in the rally. Meanwhile, speculation continues over a potential US ban on diesel exports, which could slash domestic prices but is unlikely to provide long-term relief.