Oil prices fell again early on Thursday on rising hopes a potential peace deal between the United States and Iran will reopen the blockaded Strait of Hormuz, ending the largest-ever oil supply shock.
West Texas Intermediate (WTI) crude oil for June delivery was last seen down US$3.06 to US$92.02 per barrel, while July Brent oil was down US$3.02 to US$98.25.
The drop, which follows on Wednesday's 7% fall for WTI prices, comes amid rising optimism the United States and Iran are closer to a peace deal. The Wall Street Journal reported the two countries are working with mediators to come up with a framework to resume negotiations, with talks in Pakistan beginning as soon as next week on a 14-point memorandum of understanding (MoU) offered by the Trump Administration.
There is no certainty talks will result in a deal between the two countries that will see a quick reopening of the Strait of Hormuz, the chokepoint for exports from Persian Gulf nations that supplied 20% of the world's daily oil demand. More than 1,000 ships have been trapped in the Gulf since the Feb. 28 start to the war and supplies of oil, refined products, LNG, fertilizer and other commodities are running short.
The Guardian reported U.S. President Trump is signaling a deal is "very possible", even as Iranian officials called the MoU an "American wish list".
"We should not be too optimistic about immediate agreement. A spokesperson for the Iranian finance ministry pushed back yesterday, calling parts of the US framework "ambitious and unrealistic proposals". So far, Tehran's wish list: set out in its 14-point response on May 2, is unchanged: full sanctions relief, release of frozen state assets, ~$270bn in reparations / reconstruction financing ("only way" to end the conflict), and a new multilateral mechanism for the SoH (Strait of Hormuz) that effectively recognizes Iranian sovereignty over it," Ole Hvalbye, a commodities analyst at SEB Research, wrote.