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Summary
- Upside risks remain, seasonal demand could lift prices, analysts say
- OPEC lowers 2026 oil demand growth forecast to 970,000 bpd, raises 2027 demand growth
LONDON, June 12 (Reuters) – Oil prices fell over 3% on Friday to their lowest in nearly two months after U.S. President Donald Trump cancelled new strikes on Iran, reducing fears of an escalation of hostilities following tit-for-tat attacks earlier in the week.
Brent futures were down $3.13, or 3.46%, at $87.25 a barrel by 1111 GMT, while U.S. West Texas Intermediate (WTI) crude dropped $3.14, or 3.58%, to $84.57. Both contracts were at their lowest since April 17.
A memorandum between the United States and Iran to halt the war in the Gulf could be signed as soon as Sunday, a Western source told Reuters on Friday, with Geneva emerging as the likeliest venue.
Trump called off threatened strikes on Thursday, while Iran’s Mehr news agency reported that final negotiations on a memorandum of understanding with the U.S. would focus on nuclear and economic issues but would exclude discussions about Iran’s missile programme.
Iran’s IRNA news agency meanwhile said nuclear talks would take place within a 60-day period after signing the MOU.
“Headlines are driving the market once again, as confidence grows that an eventual deal will be struck and the Strait reopens,” said PVM Oil Associates analyst Tamas Varga.
The caveat, however, was that global and regional oil stocks were still low and could drift further even with a deal, as it would take time to ensure uninterrupted oil flows, he added.
On Thursday, Iran announced the closure of the Strait of Hormuz, through which vessel traffic was already severely limited, saying it would fire on any ship trying to pass through the waterway. The strait normally carries a fifth of global oil and liquefied natural gas shipments.
The U.S. military said on social media that commercial ships continued to transit the waterway.
“We believe the market reaches an inflection point in late July if we do not see oil flows resuming before then. This is when inventory levels and seasonally stronger demand push prices significantly higher towards $120-130 per barrel,” said ING analysts in a Friday note.
Goldman Sachs lowered its 2027 average Brent forecast to $80 a barrel on higher supply and lower demand, but expects prices to exceed the 2025 average on stockpiling of OECD commercial oil stocks and a security premium for disruptions.
The Organization of the Petroleum Exporting Countries lowered its forecast for 2026 world oil demand growth to 970,000 barrels per day on Thursday from a previous 1.17 million bpd, marking its second straight downward revision.
The producer group also said consumption would rebound later, raising its demand growth forecast for 2027. It expects 2027 oil demand to rise by 1.73 million bpd, up 190,000 bpd from its previous forecast.
Reporting by Sudarshan Varadhan and Emily Chow; Editing by Tom Hogue, Jan Harvey, Emelia Sithole-Matarise and Louise Heavens
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Hormuz Reopening Could be OPEC’s Undoing: Bousso