Crude oil prices saw slight relief in early Asian hours as optimism surrounding a peace deal between the US and Iran helped lift market sentiment around global supply disruptions. Brent crude futures and the US benchmark, West Texas Intermediate, both fell by 5%.
Oil prices slipped to their two-week lows, with Brent crude quoted near the $98 per barrel mark, while WTI was trading around the $92 per barrel level. The slump in oil prices came as, on Saturday, US President Donald Trump said that both Washington and Iran have “largely negotiated” a peace deal, which could lead to the reopening of the chokepoint, the Strait of Hormuz.
According to various media reports, the deal could also release Iran’s frozen assets and aid further negotiations over the country’s nuclear programme. The Hormuz passage has been closed for nearly three months now and is a crucial trade route that transits nearly 20% of global energy flows.
Short-term relief for oil prices
Market experts have said that some crucial progress in the West Asia conflict is expected to provide short-term relief for crude prices. “Notwithstanding all the caveats and risks that remain to the peace deal and Strait of Hormuz, there is now some light at the end of the tunnel, which will bring some near-term oil price relief,” Reuters quoted Saul Kavonic, analyst at MST Marquee, as saying.
However, the Strait of Hormuz continues to remain under dual blockade, and experts have said that the infrastructure damage caused to oil and gas pipelines may take months or even years to repair and return to normal functioning.
While both oil prices have fallen below the $100 per barrel mark, they continue to trade at elevated levels, as before the war began on February 28, Brent crude was trading near the $72 per barrel mark.
Delayed agreement keeps the market cautious
Despite the reignited hopes of a prospective peace deal, market sentiment remains cautious, as on Sunday, American media outlet Anxious reported that the White House could take “several more days” to finalise the deal’s approval.
It added that US officials remain “optimistic” over the deal, but it could still fall apart.
The uncertainties surrounding the deal are being felt domestically as well, as India announced fuel price hikes again on Monday, marking its fourth increase in less than two weeks. The hike comes as oil marketing companies reported heavy losses caused by supply disruptions.
The closure of the Strait of Hormuz has created stress in global energy supply chains, as India is a net oil importer and meets more than 80% of its oil and energy requirements from the Middle East.
(With inputs from Agencies)