Oil prices tumble as Strait of Hormuz traffic resumes after US-Iran accord
Global oil prices extended their decline on Thursday, falling to about $72 per barrel, the lowest level since the outbreak of the U.S.-Iran conflict in February, as easing geopolitical tensions and improving crude supplies reassured markets.
Brent crude futures for August delivery dropped $1.06, or 1.44 per cent, to $72.68 a barrel by 0639 GMT, while U.S. West Texas Intermediate (WTI) crude fell 76 cents, or 1.08 per cent, to $69.58 per barrel.
The decline follows a sharp rally in oil prices during the conflict, when fears of disruptions to shipping through the Strait of Hormuz pushed Brent crude as high as $120 per barrel.
According to Oilprice.com, crude prices retreated from $76.75 per barrel on Tuesday to $73.50 on Wednesday as traders responded positively to signs that the key shipping route would remain open.
The fall in prices was also driven by increased crude supplies from the Middle East and expectations that Iran could boost oil exports following a temporary easing of U.S. sanctions.
Market sentiment improved after an initial agreement last week to end the U.S.-Israeli conflict with Iran, which began on February 28. The deal paved the way for the resumption of shipping through the Strait of Hormuz, one of the world’s most important oil transit routes.
The agreement provides for 60 days of negotiations on broader issues, including Iran’s nuclear programme. Analysts said oil exports are expected to continue through the strait even if talks encounter difficulties, with expectations that Iran is unlikely to attempt another closure of the waterway.
In a further effort to ease congestion, Oman on Wednesday introduced temporary shipping routes to facilitate tanker departures from the strait, working in coordination with the International Maritime Organization.
According to CNN, traders remain focused on whether shipping traffic continues to move freely through the Strait of Hormuz and whether tensions across the Middle East remain contained.
Meanwhile, U.S. President Donald Trump said a record 19 million barrels of oil passed through the Strait of Hormuz on Monday, attributing the sharp decline in oil prices to the uninterrupted flow of crude.
“19 million barrels of oil flowed out of the Hormuz Strait yesterday, an all-time record. Oil prices are tumbling down, and the world is a much safer place,” Trump wrote on his social media platform.