Oil prices declined on Friday and are on track to snap a two-week winning streak, with Brent crude futures down 25 cents to $89.45 per barrel and West Texas Intermediate crude futures falling 22 cents to $83.31 by 0035 GMT. According to Reuters, both benchmarks were poised to end the week lower, with Brent down 5.3% and WTI falling 4.3% for the week. The decline comes despite settling higher in the previous session following a report that United States President Donald Trump is not interested in returning to previous deal terms with Iran. The energy market continues to experience significant volatility due to radical and hard-to-predict political or military factors that are challenging traditional analytical models.
The Trump administration has repeatedly told mediators it has no interest in reviving the June memorandum of understanding, complicating diplomatic efforts to restart talks with Iran. As reported by the Wall Street Journal, citing people familiar with the matter, Washington said it was not in talks with Iran despite diplomatic efforts by other countries to re-engage the two sides. Earlier on Thursday, the US announced what it called the 'toughest sanctions in history' on Iran, with Tehran responding that the sanctions were an 'inhumane and hostile act' that had lost their effectiveness. The main source of market uncertainty remains the US-Iran standoff and continuing disruption around the Strait of Hormuz, with supply-chain disruptions keeping roughly 8-10 million barrels per day of global oil supply offline.
Six months into the Iran war, the world's most powerful oil alliance, OPEC+, finds itself in an unfamiliar position: unable to influence a market it once helped shape. According to Reuters, the war, which has shut a major export route for Middle Eastern oil and damaged energy infrastructure in several OPEC countries, has eroded the group's market share and ability to affect prices. OPEC+ accounted for about 40% of global oil output in July, down from more than 48% before the US and Israel attacked Iran in late February. About four to five percentage points of the decline were due to the United Arab Emirates' withdrawal from OPEC in May. The group's statements and policy decisions barely move oil markets anymore, with cuts in Chinese crude imports emerging as one of the dominant themes of 2026.
The Strait of Hormuz remains the most critical maritime chokepoint globally, with approximately 20-30% of the world's daily oil consumption passing through this bottleneck. Any threat of mining the strait, drone attacks on tankers, or direct military blockade causes absolute panic in markets. Refineries fear they will not receive their oil and are therefore willing to pay huge premiums for immediate deliveries from safer areas. The Brent-WTI spread continues to signal changes in supply, demand or shipping routes, with traders closely watching this differential as a key indicator of market conditions. The BFOE blend that serves as the current Brent benchmark comes from four main North Sea production systems: Brent, Forties, Oseberg, and Ekofisk.
Demand is showing clear signs of stress, with China's economy slowing below Beijing's 4.5-5 per cent annual growth target at the start of the third quarter. High fuel prices are weighing on industrial activity, transport and consumer spending. China has helped stabilize the market by cutting crude imports by nearly 50 per cent from pre-war levels, with seaborne crude imports falling by about 5.4 mbpd. The analyst expects global oil demand to decline by around 2 mbpd in 2026 if prices remain elevated and product shortages persist. According to the U.S. Energy Information Administration, gasoline made up about 46% of U.S. petroleum use in 2025 at about 8.9 million barrels per day, while distillate fuel oil was about 19% at about 3.9 million barrels per day.
