Early on Friday, oil prices were on track to plunge by 19% in May as traders and speculators bet on an extended ceasefire and an eventual U.S.-Iran deal despite the biggest physical supply disruption in history.
Brent Crude prices were poised to drop by 19% in May by the end of the trade day on Friday, which would be the steepest monthly decline in prices since 2020.
Early on Friday, Brent Crude front-month futures traded flat at $93.84 per barrel, while the U.S. benchmark, WTI Crude, was down by 0.12% at $88.94 a barrel.
The slump in prices in May follows the biggest monthly surge in history in April, when oil rallied amid the worst supply disruption ever and took the average U.S. gasoline prices well above $4 per gallon.
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This week, Brent Crude prices slumped below the $100 per barrel mark amid market hopes that the U.S. and Iran could be moving closer to a deal. Traders are betting that reports of a 60-day extension to the ceasefire and fresh negotiations on re-opening the Strait of Hormuz could ease the traffic congestion at the key oil and gas chokepoint in the Middle East, which has been inaccessible to most energy tanker traffic for three months now.
The latest reports as of early Friday suggest that the United States and Iran are set to extend the ceasefire, which will include the reopening of the Strait of Hormuz. However, such extension would need to be endorsed by U.S. President Donald Trump.
White House officials have said this week that President Trump would want to make “a good deal” or no deal at all, as conflicting messages have flooded the news cycle throughout the week, again.
Oil prices have whipsawed this week as fresh U.S. strikes on targets in Iran, described by the U.S. Central Command as “defensive”, clouded the outlook and the prospects of a deal.
By Michael Kern for Oilprice.com
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