Oil prices plunged by more than 4% early on Friday as the market hopes the U.S. and Iran have made progress toward a peace deal.
As of morning trade in Europe, the international benchmark, Brent Crude, had slipped by 4.34% at $86.36, extending the losses from Thursday when U.S. President Donald Trump called off a strike on Iran, claiming that a deal had been reached.
The U.S. benchmark, WTI Crude, had dipped by 4.47% at $83.88. Both benchmarks were headed to a three-month low amid one of the most optimistic signals about a deal coming from the U.S. and Iran over the past weeks.
Iran’s state media reported on Friday that a draft of a U.S.-Iran memorandum of understanding on continuing talks includes the United States lifting the blockade while Iran opens the Strait of Hormuz within 30 days.
However, the 14-point draft also reportedly includes that final peace negotiations would not begin until the U.S. suspends oil sanctions on Iran, lifts the naval blockade outside Hormuz, and releases half of Iran’s frozen funds.
The market is pinning its hopes on a re-opening of the Strait of Hormuz sooner rather than later, because one or two more months of near-paralysis of traffic would tip oil and fuel prices into new highs and weigh on economies.
Still, conflicting signals about a potential deal continue to emerge. U.S. President Trump claimed on Thursday that the U.S. “just made a great settlement of the war with Iran,” subject to the “finalization of documents.”
On Friday, Esmaeil Baghaei, spokesman of Iran’s Foreign Ministry, was quoted as saying in Iranian media that “Textually, the text has almost been finalized in its major parts. The problem is that the contradictory positions of the United States have always caused turbulence and disruption in this process.”
“American officials have repeatedly shifted positions, raised unrealistic new demands, and even carried out military attacks during the negotiations,” the official said, as carried by Iran’s Mehr News Agency.
By Tsvetana Paraskova for Oilprice.com
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