Oil prices fell on Friday after news that Iran and its Gulf neighbors would hold talks on the Strait of Hormuz eased some of the tension that had driven up crude prices in previous days.
Brent crude from the North Sea, for November delivery, dropped 2.81% to $104.61 a barrel. The contract had surged 8.65% the previous week. Its American counterpart, West Texas Intermediate (WTI), for October delivery, fell 2.37% on Friday to $100.05 a barrel.
Talks planned in Tehran
Iran's Ministry of Foreign Affairs said Tehran would hold talks on Monday intended to foster better understanding among countries in the region and to help strengthen common regional security. The ministry said Iraq and other Gulf coastal states would take part in the discussions.
The Financial Times, which had first reported the talks, said officials were expected to meet to secure support for an agreement aimed at temporarily managing maritime traffic through the Strait of Hormuz.
A key flashpoint
The Strait of Hormuz, a narrow channel between Iran and Oman connecting the Persian Gulf to the Arabian Sea, is one of the world's most important routes for oil tankers. It has become one of the flashpoints in the wider standoff between Washington and Tehran.
The disruption of much of the shipping traffic through the strait has driven up fuel prices since the conflict began.
Demand outlook adds to calm
The market was also somewhat calmer on Friday because of the prospect of a decline in consumption. The International Energy Agency (IEA), the Paris-based body that monitors global energy markets and advises on supply and demand trends, forecast a decrease in oil demand.
Yemen bottleneck remains a risk
Even so, the market remains under strain because of developments around another key chokepoint. Pro-Iranian Houthi forces have seized the entire Yemeni coastline on the Red Sea as well as the islands of the Bab el-Mandeb strait, a crucial waterway linking Asia and Europe.
The Houthis are an armed movement in Yemen that has been engaged in years of conflict and has increasingly targeted shipping lanes in the Red Sea region, adding to the pressures already facing global oil markets.
