Oil Falls, Hopes for Islamabad Talks Raise Optimism
Oil prices weakened on Friday (April 24th) after renewed hopes emerged that stalled US-Iran peace talks could resume and pave the way for restored energy flows through the Strait of Hormuz. The June WTI contract fell 1.5% to close at US$94.40/barrel in New York.
Optimism was fueled by a White House statement that the US was sending two envoys to Pakistan to meet Iranian officials, who were also scheduled to be in Islamabad. However, Tehran remained pessimistic about the prospects for negotiations. The New York Times reported that Iranian Foreign Minister Abbas Araghchi planned to deliver a new written response to the US proposal while in Pakistan.
Despite the daily decline, the market remained volatile as the Strait of Hormuz remained largely shut and messages from both sides often contradicted each other. WTI still recorded a 13% gain over the week, the biggest surge since the initial rally in the conflict in early March, indicating that the supply risk premium has not disappeared.
The blockade remains a key issue. The US maintained its blockade of Iranian ports—which some US officials say has undermined mediator-led negotiations—while Iran is using the Hormuz oil pipeline as leverage. Signs of physical pressure have also emerged, including a supertanker loaded with Iranian oil that appeared to stop transiting Hormuz on Friday.
A divergence in direction was also evident across benchmarks. Brent crude rose 0.3% to close at US$105.33/barrel in June, indicating the global market is still pricing in short-term supply tightness. Goldman Sachs estimates that restoring Gulf production will take “several months” even if Hormuz is fully reopened, with April output reportedly cut by around 14.5 million bpd, or more than 50%. Saxo Bank believes that normalizing flows could also take months and could tighten product markets, particularly diesel and jet fuel.
The market is now awaiting confirmation of whether the meeting in Islamabad actually took place, the content of Iran's written response, and any signs of a change in the status of the blockade and shipping flows in Hormuz—factors that will determine whether the oil correction continues or the geopolitical premium strengthens again. (Arl)*
Source: Newsmaker.id
