Oil prices have recorded their longest consecutive decline of the year, as expectations for a supply restoration increased following an agreement between the United States and Iran to reopen the Strait of Hormuz. This prompted several major Wall Street banks to lower their oil price forecasts.
The global benchmark Brent crude fell for a fourth consecutive session, settling below $79 per barrel, marking its lowest level since early March.
The United States and Iran are set to formally sign an interim peace agreement on Friday, which will allow oil tankers stranded since the outbreak of conflict to depart this crucial waterway.
Oil losses deepened following reports that the agreement would permit Iran to immediately resume selling oil.
According to a draft of the near-final agreement, the United States is also poised to offer Iran additional economic benefits, including access to a $300 billion development fund and exemptions for exports of Iranian crude oil, petrochemicals, and their derivatives.
Both Morgan Stanley and Goldman Sachs revised down their oil price outlooks for upcoming quarters. Goldman Sachs now anticipates that exports from the Persian Gulf will return to pre-war levels by the end of July, one month earlier than its previous forecast.
Oil prices have largely erased most of the gains accrued during the conflict period. This development may help alleviate inflationary pressures, as Federal Reserve policymakers assess the interest rate outlook this week.
Nevertheless, significant questions remain regarding the implementation of the interim agreement, including shipping security, operational rules, and whether transit fees will be imposed.
Analysts including Martijn Rats at Morgan Stanley noted in a report: "Much remains to be negotiated, and key risks persist, but for now, this is an important step towards de-escalation and increasing crude exports via the Strait of Hormuz."
West Texas Intermediate (WTI) for July delivery fell 5.8%, settling at $76.05 per barrel.
Brent crude for August delivery declined 5.1%, settling at $78.96 per barrel.
Comments