Economy
Oil Prices Fall 5% Amid US-Iran Peace Deal Hopes
By Adedapo Adesanya
Oil prices settled 5 per cent lower on Wednesday as investors awaited updates on a framework of a deal between the United States and Iran on ending their conflict and reopening the Strait of Hormuz.
Brent crude futures lost $5.29 or 5.31 per cent to trade at $94.29 a barrel, while the US West Texas Intermediate (WTI) crude depreciated by $5.21 or 5.55 per cent to $88.68 per barrel.
US Secretary of State Marco Rubio said there has been some progress in negotiations with Iran toward a deal. However, President Donald Trump said the US and Iran still have issues to resolve in peace talks, while Iran’s Fars News has said unresolved issues remain.
The US government also dismissed an Iranian state television report of a framework deal to restore shipping through the Strait of Hormuz within a month and to lift a US naval blockade on Iranian ships.
The US will withdraw military forces from the vicinity of Iran and lift its naval blockade, and the management of ship traffic through the Strait of Hormuz will be handled by Iran in cooperation with Oman, according to the report.
Traffic through the Strait of Hormuz also continued with an oil products tanker operated by a Chinese shipping group crossing the chokepoint on Wednesday, after two crude tankers sailed in the past day, although oil traffic overall was still limited.
According to the International Energy Agency (IEA), Iran’s effective closure of the Strait of Hormuz has taken more than 14 million barrels per day of Middle East oil supply offline.
Market analysts noted that the increase in shipping activity is reinforcing expectations that the critical waterway could gradually reopen, potentially restoring disrupted global energy flows and reducing near-term supply risk premiums.
On Tuesday, Iran accused the US of a grave violation of the ceasefire, following the new strikes on missile sites and boats in southern Iran, which the US Central Command described as self-defence.
The American Petroleum Institute (API) estimated that crude oil inventories in the US fell by 2.8 million barrels in the week ending May 22. US crude inventories have risen by 22 million barrels so far this year, according to API data. Official data from the Energy Information Administration (EIA) will be published later on Thursday.
