Brent falls further on US-Iran peace deal

The front-month ICE Brent contract has declined by $1.6/bbl on the day, to trade at $81.22/bbl at 09.00 GMT.

IMAGE: Getty Images

Upward pressure:

Market participants are still analysing the viability of the US-Iran peace deal.

Brent futures has gained some support amid concerns that the resumption of normal shipping traffic through the Strait of Hormuz, and a recovery in oil supplies, will not be immediate.

“This is an important juncture in the Middle East conflict. However, any recovery of oil supplies will likely take months. Shipping companies will need assurances that the key waterway is free of mines before they resume transits on a large scale,” ANZ Bank’s senior market strategist Daniel Hynes said.

Crude oil inventories in the US Strategic Petroleum Reserve have fallen to around 340 million bbls, their lowest level since 1983. Stocks have fallen sharply following continued drawdowns under the US commitment to supply 172 million bbls to the International Energy Agency’s (IEA) coordinated effort to stabilise global oil supplies amid the Middle East conflict, two analysts from ING Bank said.

Downward pressure:

Brent crude’s price has declined amid growing optimism over the reopening of the Strait of Hormuz after US President Donald Trump announced a preliminary peace deal with Iran.

Iran’s Foreign Minister Abbas Araqchi said on Tuesday that the two sides would discuss the details of the agreement in Switzerland on Friday to reach a final deal, Reuters reported.

“Crude oil prices slumped after the US and Iran announced they had reached a deal to end the Middle East conflict. The two sides are set to sign the memorandum of understanding in Switzerland on Friday,” Hynes said.

The final text of the agreement is expected to be released in the coming days.

By Shilpa Sharma

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