Oil Prices Slide on Iran Deal Hopes, Weak Chinese Demand

Oil prices dropped sharply in Friday morning trading, extending a week-long slide as traders anticipate a return of Iranian crude to the market and data points to severely weakened Chinese demand. West Texas Intermediate (WTI) crude was trading at $70.21 per barrel, down $1.71 (-2.38%), while Brent crude fell to $73.59, according to live price data. The Bakken differential stood at -$3.42 versus WTI.

The primary driver of the sell-off was continued progress on a U.S.-Iran agreement aimed at ending recent hostilities and reopening normal shipping through the Strait of Hormuz, according to OilPrice.com. Traders are removing the geopolitical risk premium they had added earlier, focusing instead on the prospect that "hundreds of thousands of barrels of Iranian crude could return to the global market sooner than expected." August WTI futures traded as low as $68.90 this week, finishing at $71.53, down 5.28% from the prior week.

Demand concerns are also weighing heavily on the market. Chinese crude oil imports are on course for their weakest month since October 2016, averaging just 6.4 million barrels per day in June, OilPrice.com reported, citing Kpler data. This represents an 8% decline from May volumes. Analysts from Rystad Energy and Energy Aspects estimate China has suffered permanent oil demand destruction of between 200,000 and 600,000 barrels per day from pre-war levels, with some expecting imports to drop by as much as 3.3 million barrels daily for the current quarter.

Adding to the bearish supply outlook, QatarEnergy issued its first crude tender since the Iran war began on February 28, offering cargoes for loading in July and August via ship-to-ship transfers outside the Strait of Hormuz, Reuters reported via OilPrice.com. This follows similar moves by Abu Dhabi's ADNOC, which has sold over 60 million barrels in recent tenders, suggesting Middle Eastern producers are increasingly confident in moving volumes through the key chokepoint.

For Bakken operators, the price drop squeezes margins at a time when the local differential remains negative. With WTI below $71, the implied Bakken price is near $66.79 per barrel. The combination of rising global supply expectations and significant demand destruction in a key importing nation creates a challenging price environment. The week's trading action has returned oil to roughly the price levels seen before the Middle East conflict began, eroding the war-related price support producers had seen in recent months.