Oil Holds Near Three-Month Low as Iran Supply Outlook Weighs
Oil prices held near a three-month low as markets assessed whether a US-Iran agreement to reopen the Strait of Hormuz could bring additional supply back into the global market. West Texas Intermediate traded below $77 a barrel after falling 16% over four sessions, marking its longest losing streak this year. Brent closed near $79 a barrel.
The interim agreement, scheduled to be signed on Friday, offers Iran broad financial incentives, including the right to immediately sell its oil. That prospect has pressured prices as traders begin to price in the potential return of Iranian exports and a recovery in energy flows through the Hormuz chokepoint.
Crude has fallen sharply in recent weeks as efforts to end the war between Washington and Tehran raised expectations that tightness in global energy markets could ease. Still, producers, shipping companies, and traders are weighing whether the deal will prove durable and how quickly vessel traffic through Hormuz can return to normal.
Dennis Kissler of BOK Financial Securities said most traders still expect US naval operations to provide escorts during the first few weeks, while mine-sweeping vessels are also likely to remain present. That could slow the flow of traffic, even as futures markets increasingly price in the possibility that oil movement will resume.
A 14-point draft memorandum provides the clearest outline so far of the agreement, although technical details are still being finalized and some wording could change. The deal is expected to pave the way for 60 days of talks aimed at formally ending the war and imposing stricter limits on Iran’s nuclear program.
Key points include a requirement for Tehran to ensure the movement of merchant vessels and a US commitment to lift its own blockade of Hormuz. The narrow waterway links the Persian Gulf with the Indian Ocean and, during peacetime, has carried about one-fifth of global oil supply.
Washington is also expected to issue waivers for exports of Iranian crude, petrochemical products, and related derivatives, including associated services such as banking, insurance, and transportation. Fundamentally, these measures could raise supply expectations, reduce the geopolitical risk premium in energy prices, and ease inflation pressure from oil.
Despite expectations of a supply revival, crude inventories are still drawing rapidly. A US industry group estimated that inventories fell by 8.3 million barrels last week, including a large decline at the key Cushing, Oklahoma hub. Official data due later on Wednesday will be closely watched for signals on near-term supply balance.
At 6:47 a.m. Singapore time, WTI for July delivery rose 0.8% to $76.65 a barrel. Brent for August settlement had closed 5.1% lower at $78.96 a barrel on Tuesday. Market focus now turns to Friday’s signing, the mechanism for reopening Hormuz, the pace of Iran’s export recovery, and official US inventory data.
Source : Newsmaker.id
