Oil Prices Dip as Traders Assess Signals of Progress Toward Iran Deal

Oil prices declined as optimism grew in the market over a potential peace agreement between the United States and Iran, despite conflicting statements from both nations regarding the progress of talks. Brent crude traded around $96 per barrel. Iranian state television reported that an informal draft memorandum of understanding on ending the conflict with Iran had been obtained, but the White House dismissed the reported memorandum as "completely fabricated." An agreement to reopen the Strait of Hormuz could release a significant volume of crude into a market already facing severe supply constraints. The Strait of Hormuz typically handles about one-fifth of the world's oil and liquefied natural gas shipments. However, key disagreements remain in the negotiations with Iran, including the unfreezing of $24 billion in Iranian assets and Tehran's reluctance to allow free passage of vessels through the strait. "There appears to be some position unwinding accelerating the price drop, but more importantly, the market is genuinely reluctant to buy the dip," said Rebecca Babin, senior energy trader at CIBC Private Wealth Group. Regarding any news about a potential peace deal, she added, "The final details and timing remain to be seen, but the current mindset is to sell first and ask questions later." Babin noted that even without confirmation of a deal, traders have become increasingly cautious about maintaining long oil exposures until there is clearer evidence of progress toward an agreement. Earlier on Wednesday, an Iranian official stated that indirect contacts with the U.S. are ongoing and that Iran's stockpile of highly enriched uranium is not on the negotiation agenda. U.S. Secretary of State Rubio cautioned that any peace agreement might take several days to finalize. Heather Conley, a non-resident senior fellow at AEI and former Deputy Assistant Secretary of State for European and Eurasian Affairs, pointed out that Iran holds a strategic advantage due to its control over the Strait of Hormuz. Quotes: As of 10:57 AM New York time, Brent July futures were down 3.4% at $96.22 per barrel. WTI July futures fell 3.3% to $90.76 per barrel.