Oil Slips, Market Reacts to US Diplomatic Push for Iran Ceasefire
Oil prices fell sharply after reports that the US was pushing for a diplomatic path to end the war with Iran, offsetting sentiment previously driven by the risk of military escalation. Brent briefly fell as much as 4.4% to below $100 per barrel, while WTI hovered around $88, indicating the market was beginning to reduce its risk premium as the prospect of a ceasefire was again discussed.
Israeli Channel 12 reported that Washington was seeking a one-month ceasefire to open the door to negotiations. Separately, the New York Times reported that the US had sent Iran a 15-point plan to end the conflict. This news eclipsed news of additional US troop deployments, including the planned deployment of approximately 2,000 personnel from the 82nd Airborne Division, as the White House weighs options to reduce Iran's control of the Strait of Hormuz.
However, the war, now in its fourth week, is still having a significant impact on supply. Tehran is said to be tightening its control over Hormuz and hampering the flow of oil and gas from Gulf producers to global markets, sparking fears of an energy crisis. White House spokeswoman Karoline Leavitt said there are "new possibilities" for diplomacy, but that US military operations will continue.
Iran has stated that foreign vessels are allowed to pass through as long as they do not support acts of aggression and comply with Tehran's regulations, according to a letter circulated to IMO members. Israel also shows no signs of abating, with attacks reportedly taking place in Tehran. A Channel 12 report stated that Israel is concerned about the ceasefire proposal and believes Iran's acceptance is unlikely, leaving the direction of negotiations uncertain.
China is also pushing for negotiations. According to a government statement, Foreign Minister Wang Yi asked Iranian Foreign Minister Abbas Araghchi to immediately engage in negotiations with the US. This push is relevant because China is a major buyer of Iranian oil, and any stabilization of Hormuz flows would directly impact Asian supplies. Market participants view a secure passage through Hormuz as a "cornerstone" of any agreement.
Downstream, shocks are already being felt in oil products. The national average price of diesel in the US has surpassed US$5/gallon and in California has reached US$7/gallon, while Australia reports hundreds of gas stations experiencing supply shortages. In the US, refineries and global buyers are pursuing alternative supplies; US oil exports are expected to rise next month. As of 8:01 a.m. in Singapore, May Brent was down 4.3% at US$99.99, and May WTI was down 4.1% at US$88.61.
Source: Newsmaker.id
