Crude shot up 2% to intraday highs overnight but later pared gains after .
Abbas Araqchi, Iranian deputy foreign minister contradicted Trump’s claim, saying that Tehran had “not lost any drone in the Strait of Hormuz nor anywhere else” and said that the U.S. may in fact have shot down one of its own by mistake.
Tensions remain high in the area where tankers have been attacked amid growing tension between Washington and Tehran over Iran’s nuclear program. The Strait of Hormutz is a key shipping route for oil and conflict in the region runs the risk of restricting oil supply.
Both parties have now also reportedly destroyed each other’s drones and, according to Investing.com’s senior commodity analyst Barani Krishnan, seem ready for further conflict despite also suggesting they want to hold negotiations.
“While few may want to give the U.S.-Iran style of gunboat diplomacy a chance, oil bulls should never be too complacent that there will be no breakthrough here – because in the off-chance there is one, another crude price collapse is very likely,” Krishnan said.
Friday’s gains broke a four-day losing streak but oil remains on track for hefty weekly declines of 7.5% in the case of U.S. crude and 6.3% for Brent.
Reports of potential talks between the U.S. and Iran contributed this week to an already sharp decline in oil prices after Hurricane Barry passed without causing as much damage as feared. Oil rigs began preparations to restart production in the Gulf of Mexico at the beginning of the week.
Oil also declined on Wednesday after the data from the Energy Information Administration showed that, despite a slightly larger-than-expected draw in U.S. crude inventories, gasoline and distillate stockpiles surged.
In other energy trading, advanced 0.8% to $1.8481 a gallon by 8:36 AM ET (12:36 GMT), while gained 1.1% to $1.8825 a gallon.
Lastly, slipped 0.1% to $2.285 per million British thermal unit.
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