Oil Falls Again, Iran Deal Becomes Market Speculation
Oil prices extended their decline after US President Donald Trump said a peace deal with Iran could be signed as early as this weekend. This statement prompted the market to relinquish geopolitical risk premiums, despite the lack of official confirmation from Tehran.
Brent crude fell 1.5% to US$89.04/barrel at 8:06 a.m. Singapore time, after closing down 2.9% at US$90.38/barrel. WTI July contracts also fell 1.6% to US$86.31/barrel. Oil prices are now at their lowest level since April, well below their peaks during the escalating conflict in Iran.
Sentiment weakened after Trump canceled plans for a new military strike against Iran and withdrew his threat to seize the Kharg Island oil terminal. Trump said Iran had agreed to the deal but also acknowledged that the agreement was not final. Iran's semi-official Fars news agency reported that Tehran had not yet agreed to any text of the agreement with the US.
If a deal is reached, the Strait of Hormuz could potentially be reopened and oil flows from the Persian Gulf could improve. However, a full recovery won't happen immediately. Mines in Hormuz need to be cleared, closed fields will need time to return to operation, and energy infrastructure damaged by drones and missiles will need to be repaired.
The market is also beginning to see some oil flows moving. Several tankers are reportedly leaving the Persian Gulf via Hormuz, while Trump said more than 100 million barrels have passed through the route since the US mission to support maritime trade. This has eased supply concerns somewhat.
However, the physical market hasn't completely relaxed. US oil inventories, including strategic reserves, fell by 15 million barrels last week and have shrunk by more than 70 million barrels in the past five weeks. Singapore's fuel stocks are also at their lowest level since 2013. This means oil prices are falling on peace hopes, but supply risks remain a key variable. (Asd)*
Source: Newsmaker.id
