Brent declines following US-Iran peace deal

The front-month ICE Brent contract has lost $3.72/bbl on the day from Friday, to trade at $82.82/bbl at 09.00 GMT.

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Upward pressure:

While there are no significant upward pressures on Brent’s price today, investors remain focused on the long-term viability of the US-Iran peace deal and the eventual reopening of the Strait of Hormuz to normal shipping traffic.

“Restarting infrastructure and logistics flows could take time, while some shipping operators may remain cautious about returning to the Strait in the near term,” two analysts from ING Bank noted.

Oil inventories and strategic stockpiles will need to be replenished following the recent disruptions, according to ING Bank’s analysts. This dynamic “should keep [oil] prices supported even as flows gradually resume,” the two analysts added.

Downward pressure:

Brent crude’s price has declined at the start of this week after US President Donald Trump declared a preliminary peace deal with Iran.

The deal guarantees the reopening of the Strait of Hormuz to commercial vessel traffic and the immediate removal of the US naval blockade of the region.

“Signs of progress toward a peace deal in the Middle East pushed crude oil prices to their lowest level since early March,” ANZ Bank’s senior market strategist Daniel Hynes said.

The final text of the agreement will be signed in Switzerland on Friday. 

“Full details remain unclear, but reports suggest the agreement includes a halt to military activity across all fronts,” ING Bank’s analysts added.

By Aparupa Mazumder

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