WTI's 7.9% weekly slide widens its discount to Brent to nearly $12

WTI did most of its falling before Friday. Working back from the 7.9% weekly loss, the contract started the week near $100.34, and working back from Friday's 2.3% drop, it closed Thursday near $94.58 ^[15][17]. That puts about $5.76 of the week's $7.93 decline, some 73%, in the four sessions before Friday ^[17]. Brent went the other way over those days. A 2.1% Friday drop to $104.32 on a roughly flat week implies a Thursday close near $106.56, a gain of about $2.24 ^[18].

On Friday, the only session the report prices on its own, both contracts fell together as talks between Iran and the United States returned to the market's attention ^[6][1][2]. A reopened strait would put barrels back on a major route for global energy shipments ^[8], and Brent is the global benchmark ^[2]. Over the week, though, the gap between the two contracts went from roughly $4 to $11.91 ^[16][14].

From here, Washington can meet the June terms and Iran can reopen the strait inside its seven-day window ^[3]. If that happens, Brent has the most room to drop, since it has barely fallen. Washington can also let the offer sit. Iranian Foreign Minister Abbas Araghchi told reporters at the U.N. on Thursday that Tehran would resume talks toward a permanent agreement once Washington meets the conditions of the earlier memorandum, and he set the timing against the US political calendar ^[4]. "I think it would be much better if it is done before the midterm election, but it depends on the U.S. administration to decide," Araghchi said. "We are not in a hurry." ^[5] The third path is that talks restart and break down over transit rights a second time ^[7].

Waiting has a cost on Iran's side. Reuters, citing TankerTrackers, reported on September 1 that no major Iranian crude cargo had moved through Hormuz toward China for about seven weeks ^[9]. Majestic X, seized by the US in the Indian Ocean in April, was on its way to China when it was taken ^[11].

Some of the seized barrels are bound for Texas instead. Voice of America's maritime data showed Majestic X, with about 1.88 million barrels aboard, and a second tanker, Tifani, heading toward Galveston ^[11][12]. Baker Hughes counted three more US oil rigs in the week to September 25, for 455 ^[13], so drillers added activity in a week when their benchmark lost about $7.93 a barrel ^[17]. The report does not tie WTI's steeper fall to either development.

I think the week shows a diplomacy trade on Friday and a WTI-only discount across the four sessions before it. Energy exposure priced off Brent is close to where it started the week. Exposure priced off WTI has moved about $8 while the diplomacy has not moved at all, since Iran is still waiting for an American response ^[4]. The view is wrong if WTI climbs back toward $100 when the offer stalls, with Brent holding near $104, because that would mean the US contract was carrying the Hormuz bet all along.