Oil Prices Fall as a Report Says Peace Talks Between the U.S. and Iran May Resume
Oil prices fell early on Friday following a report that said Pakistani officials expect another round of talks between the United States and Iran.West Texas Intermediate crude oil for May delivery was last seen down US$1.07 to US$94.78 per barrel, while May Brent oil fell US$0.42 to US$104.65.Bloomberg News reported Iranian Foreign Minister Abbas Araghchi and a team of negotiators are expected to arrive in Islamabad late on Friday for talks with a U.S. delegation already in place. The report sent prices down from overnight highs on hopes a potential deal that would reopen the blocked Strait of Hormuz.The Strait is the chokepoint for exports from Persian Gulf nations, which supplied 20% of daily oil demand prior to the Feb. 28 start to the war, which also trapped shipments of of diesel and jet fuel, as well as petrochemical feedstocks and fertilizers."What began as a crude oil supply shock linked to the effective closure of the Strait of Hormuz has now broadened into a multi-commodity disruption. The implications are no longer confined to energy markets alone but are spreading into industrial production, transportation, and ultimately agriculture and food price," Ole Hansen, head of commodity strategy at Saxo Bank, wrote.Still, a quick end to the war is unlikely to produce a quick end the largest-ever energy supply shock. The U.S. Pentagon on Thursday warned it may take six months to clear mines laid in the Strait, the Washington Post reported on Thursday."That is a completely different timescale from what the financial market is pricing. Even a political deal tomorrow does not immediately reopen the strait," Ole Hvalbye, a commodities analyst at SEB Research, wrote.