Oil prices declined for the second consecutive session during Friday's Asian trade, after United States President Donald Trump cancelled planned military strikes against Iran, easing concerns over an immediate escalation in the Middle East despite continuing disruptions to global energy supplies.
By 2:55 pm AEST (4:55 am GMT), Brent crude futures were down $1.62, or 1.8%, at $88.76 a barrel. U.S. West Texas Intermediate crude fell $1.45, or 1.7%, to $86.26 a barrel.
The declines followed losses overnight after Trump reversed course on plans to strike Iran. The president, who had earlier threatened to hit Iran "very hard", said on Thursday that discussions with Tehran had advanced and that a peace agreement reopening the Strait of Hormuz to shipping could be signed as soon as this weekend.
However, Iran's semi-official Fars news agency reported that Tehran had not approved the text of any proposed agreement, casting uncertainty over the prospects for a diplomatic breakthrough.
Analysts at ING said the recent stability in oil prices understated the extent of supply disruptions caused by the conflict in the Persian Gulf.
"The relatively benign price action in recent weeks masks the scale of the supply disruptions from the Persian Gulf. However, in the absence of a deal, this is unlikely to last. 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/bbl."
The Strait of Hormuz remains a key concern for energy markets.
On Thursday, Iran announced "the closure" of the strategic waterway, warning that it would fire on any vessel attempting to transit without authorisation.
The strait typically handles around one-fifth of global oil and liquefied natural gas shipments, and restrictions imposed during the months-long conflict have continued to support energy prices.
Meanwhile, the Organization of the Petroleum Exporting Countries (OPEC) lowered its forecast for global oil demand growth in 2026 in its Monthly Oil Market Report.
OPEC reduced its outlook for demand growth to 970,000 barrels per day from a previous estimate of 1.17 million barrels per day, marking the second consecutive downward revision.
ING analysts said OPEC's latest projections remained relatively optimistic compared with other industry forecasts.
"OPEC remains fairly constructive on global oil demand, expecting it to grow just shy of 1m b/d YoY in 2026. This is down from a previous forecast of 1.17m b/d year-on-year, though. Most other agencies forecast a contraction in demand this year amid supply disruptions in the Middle East."
