Oil prices closed sharply lower this Friday after reports that China is backing a Pakistani initiative to resume negotiations between the United States and Iran. The possibility of a diplomatic solution eased some of the market's concerns about global oil supply.
Brent, the international benchmark, fell nearly 4% and ended the day quoted at US$ 96,78 per barrel. Meanwhile, West Texas Intermediate (WTI), the benchmark in the United States, declined about 3%, closing at US$ 89,31 per barrel.
According to sources close to the negotiations, the Pakistani government is trying to reopen dialogue between Washington and Tehran with China's backing. Beijing is seeking to reduce tensions in the region given the impacts the clashes have been causing to international trade and maritime transport.
“The Chinese are unhappy because Iran's attacks on other Gulf states and the closure of the Strait of Hormuz are affecting their interests,” a Pakistani government official told Reuters.
Even with this Friday's drop, oil is still posting significant gains for the week. Brent rose about 10% in the period, while WTI posted an increase of nearly 8%, driven by the conflicts in the Middle East.
The United States Central Command (Centcom) said it carried out the 13th consecutive night of attacks against Iranian military facilities, including command centers, drone depots, and communication systems.
According to Centcom, the operations are aimed at “further reducing the threat that Iran poses to civilian sailors and commercial vessels transiting through the Strait of Hormuz.”
Meanwhile, the current President of the United States, Donald Trump, said he is considering a “massive attack” against Iran if the clashes continue to intensify.
“I am considering a massive attack. Bigger than ever. I am close to making a decision. We are all ready for it,” he said in the interview.
Tensions also increased after Iran's Revolutionary Guard declared that it attacked an American military base in Jordan. At the same time, analysts continue to monitor the risks to maritime transport in the Red Sea and the Strait of Hormuz, strategic routes for the global oil trade.
For analyst Daniela Hathorn, from Capital.com, attacks on commercial ships and instability on the main energy routes keep oil's risk premium elevated. Giovanni Staunovo, from UBS Global Wealth Management, assesses that the market still overestimates the speed of the recovery in production in the region, although the institution continues to project Brent at around US$ 85 per barrel by the end of the year.