Oil Drops to Pre-Iran War Levels
Oil prices fell 2% on Thursday (June 17th) to their lowest level since the first trading day of the Iran war. Pressure arose after an interim US-Iran deal opened the door to an end to the war, the restoration of the Strait of Hormuz, and the easing of sanctions on Tehran.
Brent fell $1.59, or 2%, to $77.96 per barrel at 08:11 GMT, while WTI fell $1.83, or 2.38%, to $74.96 per barrel. Brent hit its lowest level since March 2nd, while WTI was at its lowest level since March 4th.
The 14-point agreement begins a 60-day negotiation period. During that period, Iran will allow free passage of ships through the Strait of Hormuz, a vital waterway for global oil and gas shipments. The agreement also aims to return traffic in the strait to full capacity within 30 days.
However, several major issues remain pending, including Iran's nuclear program and the $300 billion Iran recovery fund planned by the US and its partners. Therefore, market players still believe the recovery in energy flows will be gradual, rather than a sudden return to normal.
Goldman Sachs estimates that Gulf exports could return to pre-war levels by the end of July, while oil production will recover in October. The IMF also believes that oil prices are likely to decline gradually, but not sharply, as countries still need to replenish reserves and shipping activity will take time to normalize.
Additional pressure comes from expectations that the Federal Reserve may raise interest rates later this year to curb inflation. Higher interest rates could slow economic growth and suppress oil demand. The market's next focus will be on the implementation of the Hormuz opening, US-Iran negotiations, and the direction of the Fed's policy. (arl)
Source: Newsmaker.id
