Oil prices fell sharply on Thursday, dropping to their lowest levels since the
outbreak of the US-Iran conflict, as an interim agreement between the United
States and Iran improved prospects for global crude supply.
According to the latest report, Brent crude futures declined by $1.53, or 1.9 per
cent, to $78.02 per barrel as of 1326 GMT, while U.S. West Texas Intermediate
(WTI) crude fell $2.22, or 2.9 per cent, to $74.57 per barrel.
Brent crude touched its lowest level since the first trading session following the
initial US-Israeli strikes on Iran, while WTI dropped to its weakest level since
early March.
Market sentiment was driven by expectations of increased Iranian oil exports
after Washington and Tehran signed a 14-point memorandum of understanding
aimed at de-escalating tensions.
“The selloff extended as energy markets continued to aggressively price in a
faster-than-expected return of Iranian barrels following the recent U.S.-Iran
memorandum of understanding,” said IG market analyst, Tony Sycamore.
The agreement initiates a 60-day negotiation period during which Iran will
allow toll-free passage through the Strait of Hormuz, one of the world’s most
critical oil and gas shipping routes. The deal also envisages restoring traffic
through the waterway to full capacity within 30 days.
Analysts expect a gradual recovery in oil flows through the Strait of Hormuz,
although industry experts caution that prices may not collapse significantly as
global demand remains resilient and inventories require replenishment.
Goldman Sachs projects that Gulf oil exports will return to pre-conflict levels
by the end of July, with crude production expected to recover fully by October.
The investment bank estimates that normalisation could add about 13 million
barrels per day in Hormuz flows, restoring volumes to roughly 70 per cent of
pre-war levels.
Despite the recent decline, BNP Paribas said it does not expect oil prices to
return to pre-conflict levels. The bank sees $75 per barrel as a “durable floor for
the foreseeable future,” citing persistent supply constraints and firm demand.
