Oil Falls to the Lowest in More than Three Months as the Iran-U.S. Deal Looks to Free Persian Gulf Supply
Oil traded at the lowest in more than three-months early on Thursday after Iran and the United States signed a ceasefire deal that promises to soon reopen the Strait of Hormuz, freeing up supply from Iran and the Persian Gulf nations that has been blocked since the war began on Feb. 28.West Texas Intermediate crude oil for July delivery was last seen down US$1.31 to US$75.48 per barrel, the lowest since March 4, while August Brent oil was down US$1.07 to US$78.48.Oil prices have sunk by 16% since last Friday as the United States and Iran on the weekend reached a deal to end the war that has blocked the Strait of Hormuz since the end of February. The closure of the Strait trapped in much of the supply from Persian Gulf nations that produced a fifth of daily oil demand.The United States and Iran on Wednesday signed their 14-point memorandum of understanding, which begins a 60-day negotiations period and sees sanctions on Iranian exports lifted and reopens the key Strait, freeing supply trapped on tankers in the Gulf since the war began ."Crude prices fell to fresh lows after Wednesday's rebound proved short-lived, with markets continuing to price in a rapid normalization of supply following President Trump's signing of the US-Iran interim peace deal. Attention has now shifted to the pace at which traffic through the Strait of Hormuz can recover. An estimated 100 million barrels of crude and refined products are already loaded on tankers and waiting to leave the Gulf, while regional producers are taking steps to restart shut-in production," Saxo Bank noted.The Energy Information Administration on Wednesday reported U.S. oil stocks fell by 8.3-million barrels last week, the eighth-straight weekly drop. Bloomberg News reported the U.S. Strategic Petroleum Reserve has also been depleted, with stocks falling to the lowest since 1983 as the country looked to boost supply to lower fuel prices.
