Shafaq News
Oil prices fell more than $1 per barrel onThursday after the U.S. and Iran signed an interim agreement that would endthe Iran war, reopen the Strait of Hormuz and waive U.S. sanctions on Tehran'soil, boosting the oil supply outlook.
Brent crude futures were down $1.64,or 2.06%, at $77.91 a barrel as of 0427 GMT, and U.S. West Texas Intermediatefell $1.80, or 2.34%, to $74.99 a barrel.
The benchmarks resumed theirdecline, reversing gains made on Wednesday after U.S. President Donald Trumpsaid he could resume his bombing campaign if Iran's leaders "don'tbehave".
"The sell-off extended asenergy markets continued to aggressively price in a faster-than-expected returnof Iranian barrels following the recent U.S.-Iran memorandum ofunderstanding," IG market analyst Tony Sycamore said in a note.
The 14-point memorandum begins a60-day negotiation period during which Iran will allow toll-free passagethrough the Strait of Hormuz, a key oil and gas shipping lane. The deal callsfor traffic through the strait to be restored to its full capacity within 30days.
The preliminary accord defers manyof the more difficult issues such as Iran's nuclear program, and also requiresthe U.S. and its partners to come up with a $300 billion plan to financeIran's recovery.
Analysts are cautious on how muchfurther oil prices might decline in the near term, as supply could remaintight even after the Strait of Hormuz reopens.
"The volume of crude returningto the market after Hormuz reopens could be limited as some cargoes alreadyexited through workaround arrangements, while shipowners may remain reluctantto send tankers back into the region amid concerns the agreement couldcollapse," said Mukesh Sahdev, CEO of energy consultancy XAnalysts.
"Overall crude demand may comefaster than supply, checking price falls to pre-war levels," he said.
If the U.S.-Iran agreement issuccessfully implemented and the strait reopened, this year's supply crisiscould turn into a significant supply glut in 2027, the IEA cautioned onWednesday, forecasting in its monthly market report that supply will outstripdemand by 5.05 million barrels per day next year as Middle East oil returns tothe market.
Also weighing on the oil market areramped-up bets the U.S. Federal Reserve may raise interest rates later thisyear to rein in inflation, which could slow economic growth and suppress oildemand.
Nine of 19 Fed policymakers nowthink a rate hike will be needed, Wednesday projections showed, a departurefrom three months ago when none of them held that view.
(REUTERS)
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