Shafaq News
Oil prices slipped to their lowest since March onMonday after U.S. President Donald Trump and Iran's deputy foreign ministersaid they had reached an initial deal to end the war and to resume trafficthrough the Strait of Hormuz.
Brent crude futures fell $4.08, or 4.7%, to $83.25 abarrel by 0415 GMT and U.S. West Texas Intermediate was at $80.53, down $4.35,or 5.1%. Both contracts fell to their lowest levels since March 10 on Mondayafter tumbling more than 3% on Friday.
The U.S. and Iran will sign a memorandum ofunderstanding in Switzerland on Friday, said the prime minister of Pakistan,whose country has served as a mediator. Trump said on Sunday that the Strait ofHormuz would be open "toll free" and that a U.S. naval blockade ofIranian ports would also end.
Iran's semi-official Mehr news agency said the draftdeal called for reopening the Strait of Hormuz within 30 days under Iranianarrangements.
"The geopolitical risk premium that had beenbuilt into crude is now being unwound quite aggressively as traders price inthe prospect of restored oil flows," said Tim Waterer, chief marketanalyst at KCM Trade.
The world has lost millions of barrels of oil and gassupply since the war closed the Strait of Hormuz, a chokepoint for a fifth ofthe world's oil and liquefied natural gas supplies, for more than three months.
Investors are also watching cautiously how quicklyMiddle Eastern producers can resume oil production and exports followingdamage from the war and whether more ships will enter the region.
"While these uncertainties suggest upside risksto our forecast for Brent oil futures to reach $80/bbl by the end of the year,it's worth noting that oil flows through the Strait of Hormuz just needs toreach 60-70% of pre-war levels to return oil markets to pre-war oversupplyexpectations," Vivek Dhar, a commodities strategist at Commonwealth Bankof Australia, said in a note.
Iran's deputy foreign minister, Kazem Gharibabadi,said a more expansive agreement would be negotiated during a 60-day ceasefireperiod.
E4 nations, which include the UK, France, Germany andItaly, said on Sunday the countries were prepared to lift sanctions on Iranin response to steps on its nuclear programme.
"Beyond the immediate price reaction, attentionwill now shift toward the pace of actual supply normalization and compliancewith the agreement," said Priyanka Sachdeva, senior market analyst atPhillip Nova.
"While the conflict may have come to an end andoil flows through the Strait of Hormuz may gradually return to normal, thedamage already done cannot be reversed overnight. This includes not only anyphysical damage to oil infrastructure but also the economic strain endured byoil importing economies that have faced elevated energy costs formonths."
(Reuters)
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