Oil prices decline as U.S. rejects Iran deal revival

Oil prices slipped on Friday and were headed for their first weekly decline in three weeks, despite rising in the previous session after a Wall Street Journal report said U.S. President Donald Trump was not interested in returning to the terms of an earlier deal with Iran.

Brent crude futures fell 50 cents, or 0.6%, to $89 a barrel, while West Texas Intermediate crude futures declined 42 cents, or 0.50%, to $83. Brent was on track to lose 5.3% for the week, while WTI was set to fall 4.3%.

The Wall Street Journal report, citing people familiar with the matter, said the Trump administration had repeatedly told mediators that it did not want to revive the June memorandum of understanding. The position has complicated diplomatic efforts aimed at restarting talks between Washington and Tehran.

The report came a day after Washington said it was not holding talks with Iran, despite efforts by other countries to bring the two sides back to the negotiating table.

The United States on Monday announced what it described as the "toughest sanctions in history" on Iran. Tehran called the measures an "inhumane and hostile act" and said they had lost their effectiveness.

Geopolitical tensions also intensified elsewhere. Moscow warned that it could target British military targets inside and outside Ukraine in response to attacks by Kyiv on Russian territory using British-supplied long-range cruise missiles.

Trump, however, said Russian President Vladimir Putin would not attack a NATO country. He also played down media reports that CIA Director John Ratcliffe had warned Russian officials this week against such an attack. Britain is one of NATO's founding members.

The duration of the disruption will be a key factor for crude prices. JPMorgan estimates that each additional month of disruption could add around $7 to $8 a barrel to Brent prices. If the disruption continues for three months, the bank expects average monthly Brent prices to climb to around $114 a barrel.

Goldman Sachs has also warned that Brent could rise to $120 a barrel if shipping disruptions through the Strait of Hormuz, the world's most important oil transit route, persist.

At the same time, Goldman Sachs expects Middle East tensions to eventually ease under its base case. The bank forecasts Brent to average $80 a barrel in the fourth quarter and $75 a barrel next year. It said the risks remained tilted to the upside, with disruptions through the Strait of Hormuz and the Red Sea potentially lasting longer than expected.