Global oil prices tumbled on Thursday, reaching their lowest levels since the onset of the recent U.S.-Iran conflict, after an interim agreement between Washington and Tehran boosted expectations of increased crude supply to international markets. It was learnt that Brent crude futures fell by $1.53, or 1.9 per cent, to $78.02 per barrel as of 1326 GMT. U.S. West Texas Intermediate (WTI) crude also declined sharply, dropping $2.22, or 2.9 per cent, to $74.57 per barrel.
The decline pushed Brent to its weakest level since the first trading session following the initial U.S.-Israeli strikes on Iran, while WTI touched its lowest point since early March.
Market sentiment was largely influenced by optimism that Iranian oil exports could rise after the United States and Iran signed a 14-point memorandum of understanding designed to ease tensions between the two countries.
“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.
Under the agreement, both sides have entered a 60-day negotiation period during which Iran will guarantee toll-free passage through the Strait of Hormuz, a strategic route for global oil and gas shipments. The arrangement also aims to restore traffic through the vital waterway to full operational capacity within 30 days.
Analysts anticipate a gradual rebound in oil flows through the Strait of Hormuz, although industry observers caution that prices are unlikely to experience a steep collapse due to sustained global demand and the need to rebuild inventories.
Goldman Sachs forecasts that oil exports from the Gulf region will return to pre-conflict levels by the end of July, with full crude production recovery expected by October. The bank estimates that the normalisation process could increase Hormuz oil flows by approximately 13 million barrels per day, restoring volumes to about 70 per cent of levels recorded before the conflict.
Despite the recent market downturn, BNP Paribas maintains that oil prices are unlikely to fall back to pre-conflict levels. The bank believes that $75 per barrel will remain a “durable floor for the foreseeable future", supported by ongoing supply limitations and steady global demand. Reuters
