Oil renews three-month low with new peace deal between US and Iran

Oil prices fell more than 2% on Tuesday (16), hitting a new three-month low, as markets assessed the prospects for a resumption of supplies through the Strait of Hormuz, along with weaker physical demand and few details on a preliminary agreement to end the war with Iran.

Brent oil futures contracts fell 2.62%, to US$ 81 a barrel, at 8:30 am Brasília.

US West Texas Intermediate (WTI) crude fell 3% to $78.33 a barrel, after hitting $78.27, its lowest since March 10.

Oil prices fell nearly 5% on Monday after US President Donald Trump announced a tentative deal to end the US-Israel war with Iran, although full details have not yet been released.

Iranian Foreign Minister Abbas Araqchi said on Tuesday that Iran and the US will begin a new round of talks in Switzerland on Friday to reach a final agreement.

"Short-term downside risks persist as the market prices in a quicker reopening of the Strait and the return of trapped barrels," said Saxo Bank analyst Ole Hansen.

However, low inventories, strong seasonal demand, strategic restocking and persistent geopolitical uncertainty suggest that the path back to pre-war oil prices may be much less direct than current market optimism implies, Hansen said.

Reopening the Strait
The conflict has led to the closure of the Strait of Hormuz, which normally carries about a fifth of the world's oil supply.

So far, few oil tankers have crossed the strait since the announcement of the framework agreement, although ships have been quietly moving barrels along the coast of Oman for weeks, sailing "under the radar" with support from the US Navy. Transporters await safety guarantees to cross the strait, including the removal of mines.

The U.S. military oversaw dozens of secret ship-to-ship oil transfers to keep Gulf energy exports flowing, using aerial and water drones as well as helicopters in an operation to guide convoys to waiting oil tankers.

Early indications suggest the U.S.-Iran deal would reopen the blocked strait and extend the ceasefire for 60 days, buying time for negotiations on issues such as Iran's nuclear program.

Some analysts expect flow through the strait to resume soon, adding to the downward pressure exerted by physical markets, which are already down.

A number of indicators have pointed to a weakening in physical oil markets in recent weeks, Morgan Stanley analysts said in a note to clients.

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Goldman Sachs lowered its fourth-quarter Brent price forecast from $90 to $80 per barrel and cut its average estimate for 2027 from $80 to $75, saying it now assumes Gulf exports will return to pre-war levels by the end of July rather than the end of August.

China's crude oil imports fell 29% in May to their lowest level in eight years, extending a sharp decline for the world's biggest importer. A drop in Saudi crude oil shipments is also expected in July.

"We also had some weaker than expected Chinese data, suggesting that perhaps demand from the world's second-largest economy and one of the top oil-consuming nations may be weakening at a time when oil supply is expected to rise again as restrictions on Iran are eased," said Fawad Razaqzada, market analyst at Forex.com.

With details still uncertain and a permanent truce yet to be secured, analysts say volatility risks remain.

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Source: CNN