Hormuz Agreement Pushes Oil to One-Month Low
Oil prices saw limited movement at Wednesday's close (Aug 5) as the market reassessed the prospects of the Strait of Hormuz opening. The WTI contract for September delivery fell 0.73% to US$75.22 per barrel—its lowest level in nearly a month—while the Brent contract for October rose slightly by 0.11% to US$79.45, indicating that downward pressure was more pronounced for US oil.
Iran announced it had reached an understanding with Oman regarding shipping lane coordinates through Hormuz. Although a joint statement is in the final stages of drafting, the agreement does not automatically guarantee the immediate opening of the trade route, as security and oversight mechanisms are still under discussion.
The preliminary plan reportedly directs inbound vessels through Iranian-controlled waters and outbound vessels through Omani waters. However, major hurdles remain, including transit fees, vessel inspection rights, the role of Iran's Revolutionary Guard, and the lifting of blockades on Iranian ports.
Additional pressure stemmed from a 2.5-million-barrel rise in US crude inventories to 407 million barrels—contrary to forecasts of a 1.5-million-barrel decline. Stocks at the Cushing delivery hub also surged by approximately 2.4 million barrels, even as gasoline and distillate inventories saw sharp drops.
Geopolitical risks continued to limit the downside after Houthi rebels claimed an attack on a Saudi oil tanker and threatened to escalate attacks in the Red Sea. These conditions have made investors hesitant to fully unwind long positions, as a diplomatic failure could once again disrupt energy flows through Hormuz or the Bab el-Mandeb Strait.
Newsmaker Analysis: WTI sentiment remains bearish as long as prices stay below US$76, with a potential test of the US$74–US$73 range. Brent needs to break back above US$80–US$81 to alleviate selling pressure; failure to do so could see prices slide toward US$78–US$77. A formal Hormuz agreement could extend the decline, whereas new attacks or a failure to implement the agreement could potentially push Brent back to US$82–US$85. (arl)
Source: Newsmaker.id
