Summary
- Brent, WTI back to early-March levels
- US-Iran 14-point agreement extends April ceasefire for 60 days
- Market fundamentals expected to remain tight
- Ukraine hits Moscow refinery in major attack on Russian capital
(Reuters) – Oil prices fell more than 1% on Thursday to their lowest since the first trading day of the Iran war, as a U.S.-Iran interim deal to end the conflict, reopen the Strait of Hormuz and ease sanctions on Tehran boosted the global supply outlook.
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Brent crude futures were down $1.02, or 1.28%, at $78.53 a barrel at 1036 GMT, while U.S. West Texas Intermediate fell $1.48, or 1.93%, to $75.31 a barrel.
Brent sank to its lowest since March 2, which was the first day of trading after the initial U.S.-Israeli strikes on Iran, while WTI was at its lowest since March 4.
“The selloff extended as energy markets continued to aggressively price in a faster-than-expected return of Iranian barrels following the recent U.S.-Iran memorandum of understanding,” IG market analyst Tony Sycamore said in a note.
The 14-point memorandum begins a 60-day negotiation period during which Iran will allow toll-free passage through the Strait of Hormuz, a key oil and gas shipping lane. The deal calls for traffic through the strait to be restored to its full capacity within 30 days.
The preliminary accord defers many of the more difficult issues, such as Iran’s nuclear programme, and also requires the U.S. and its partners to come up with a $300 billion plan to finance Iran’s recovery.
Analysts expect a gradual recovery in flows through the Strait of Hormuz, while industry experts have cautioned that prices may not plummet as demand recovers and inventories are refilled.
Investment bank Goldman Sachs expects Gulf exports to normalise to pre-war levels by end-July, with crude production recovering by October.
The bank estimates that a normalisation in exports to pre-war levels might be achieved with a 13 million barrels-per-day increase in Hormuz flows from current levels to around 70% of pre-war levels.
BNP Paribas does not currently anticipate a return to pre-war prices and views $75 per barrel as a “durable floor for the foreseeable future,” it said in a note, given ongoing supply losses and higher demand. Brent traded around $60-70 per barrel in the first two months of the year before the Iran war.
China, the world’s second-largest oil consumer, is forecast to consume 753 million metric tons in 2026, down 4.9% from 2025 amid a pivot to new energy and high oil prices, according to a report published by PetroChina’s research unit.
Meanwhile, Ukrainian drones hit the Russian capital’s oil refinery for the second time this week in what Kyiv cast as a demonstration of its growing capabilities.
Reporting by Robert Harvey in London, Anushree Mukherjee in Bengaluru, Colleen Howe in Beijing and Siyi Liu in Singapore. Editing by Sonali Paul, Jan Harvey and Mark Potter
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