Oil falls to near two-month low as Trump eases rhetoric
OPEC report shows jump in Iran heavy crude price
Oil prices fell more than 3% on Friday to their lowest level in nearly two months after US President Donald Trump backed away from threats against Iran, easing fears of a broader escalation following reciprocal attacks earlier in the week.
Brent crude futures fell $3.13, or 3.46%, to $87.25 a barrel by 1111 GMT, while US West Texas Intermediate (WTI) crude dropped $3.14, or 3.58%, to $84.57 a barrel. Both benchmarks hit their lowest levels since April 17, according to Reuters.
A memorandum between the United States and Iran aimed at halting the war in the Persian Gulf could be signed as early as Sunday, a Western source told Reuters, with Geneva emerging as the most likely venue. Trump called off threatened strikes on Thursday, while Iran's Mehr news agency reported that final negotiations on a memorandum of understanding with the United States would focus on nuclear and economic issues and would exclude discussions on Iran's missile program. "Headlines are driving the market once again, as confidence grows that an eventual deal will be struck and the Strait of Hormuz reopens," said PVM Oil Associates analyst Tamas Varga.
Friday's price drop comes after months of upheaval that began when the US and Israel launched their war on Iran on February 28. The war triggered the closure of the Strait of Hormuz, a key chokepoint through which roughly one-fifth of the world's seaborne crude oil and liquefied natural gas (LNG) passed in peacetime. In Mid-April, Trump also imposed a naval blockade on Iran's southern ports and vessels, aiming to damage Iran's economy and oil sector and pressure Tehran into accepting its preferred peace terms. The disruption kept oil prices hovering around triple-digit levels as the prolonged standoff left traders on edge.
Despite the recent decline in benchmark prices, OPEC's latest monthly report showed that the price of Iran Heavy crude rose by more than $10 per barrel in May compared with April.
According to the report, Iran Heavy averaged $115.39 per barrel in May, up $10.24 from $105.15 per barrel in April. The average price of Iran Heavy from the beginning of 2026 through May stood at $94.97 per barrel, compared with $72.89 during the same period of 2025.
Citing secondary sources, OPEC said Iran's crude oil production fell by 546,000 barrels per day (bpd) in May from the previous month to 2.33 million bpd. The 19% decline in May came after the United States adopted the naval blockade policy. Iran's oil production had declined by 179,000 bpd in April from the previous month.
The roughly $10 increase in the price of Iran's crude in May partly offset the decline in the country's oil production and exports during the month, the report indicated.
Separately, OPEC lowered its forecast for 2026 global oil demand growth to 970,000 bpd on Thursday from a previous estimate of 1.17 million bpd, marking its second consecutive downward revision. The producer group said demand would rebound later, raising its forecast for 2027 oil demand growth to 1.73 million bpd, up 190,000 bpd from its previous projection.
The average OPEC Reference Basket price reached $114.55 per barrel in May, up $5.49 from $109.06 in April. The basket averaged $94.50 per barrel during the first five months of 2026, compared with $72.50 in the corresponding period of 2025.
Based on secondary-source data, OPEC's crude oil production declined by 177,000 bpd in May to 18.829 million bpd, while Iran's production stood at 2.33 million bpd. Production by OPEC's partners in the OPEC+ group edged down by 9,000 bpd in the previous month to 14.303 million bpd, bringing combined OPEC and non-OPEC production down by 185,000 bpd to 33.132 million bpd.