Oil falls to lowest level since Middle East war began

Oil falls this Thursday (18), reaching the lowest level since the first day of trading after the start of the war in the Middle East.

The drop in prices comes as the progress of the interim agreement between the US and Iran to end the conflict, reopen the Strait of Hormuz and ease sanctions against Tehran has improved global supply prospects.

At around 11 am, Brent oil fell 3%, to US$ 77 a barrel.

At the same time, WTI, a reference in the American market, fell around 3.7%, to US$ 73 a barrel.

Brent hit its lowest level since March 2, which was the first day of trading after the initial US and Israeli attacks on Iran, while WTI recorded its lowest level since March 4.

"The selling spree prolonged as energy markets continued to aggressively price in a faster than expected return of Iranian barrels following the recent memorandum of understanding between the US and Iran," IG market analyst Tony Sycamore said in a note.

The 14-point memorandum begins a 60-day negotiation period during which Iran will allow toll-free passage through the Strait of Hormuz, a key oil and gas shipping route. The agreement calls for traffic through the strait to be restored to full capacity within 30 days.

The preliminary agreement postpones many of the most complex issues, such as Iran's nuclear program, and also requires the US and its partners to come up with a $300 billion plan to finance Iran's recovery.

Analysts expect a gradual recovery in flows through the Strait of Hormuz, while industry experts warn that prices may not fall dramatically as demand recovers and stocks are replenished.

Investment bank Goldman Sachs expects Gulf exports to return to pre-war levels by the end of July, with oil production recovering by October.

The bank estimates that normalization of exports to pre-war levels can be achieved with an increase of 13 million barrels per day in flows through the Strait of Hormuz, rising from current levels to around 70% of pre-war levels.

*With information from Reuters

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Source: CNN