Oil prices dropped below $100 a barrel today after US President Donald Trump announced he had reached a two-week ceasefire agreement with Iran, contingent on the immediate and safe reopening of the Strait of Hormuz, reports RTE.
Brent crude futures fell by $15.78, or 14.4%, to $93.49 a barrel in mid-morning trade, while WTI futures dropped $18.90, or 16.7%, to $94.05, reports RTE.
Benchmark European diesel prices also declined, falling $311, or 20.4%, to $1,216.75 a metric ton.
Trump’s reversal came shortly before his deadline for Iran to reopen the Strait of Hormuz or face widespread strikes on its civilian infrastructure. Approximately 20% of the world’s daily oil supply passes through the narrow waterway, reports RTE.
“This will be a double sided CEASEFIRE!” Trump wrote on social media after posting earlier yesterday that “a whole civilization will die tonight” if his demands were not met.
Iran stated it would cease its attacks if strikes against it were halted, and that safe passage through the Strait of Hormuz would be possible for two weeks in coordination with Iranian armed forces, according to a statement by Foreign Minister Abbas Araqchi, reports RTE.
In theory, the 10-13 million barrels per day of crude oil and product supply held up behind the Strait of Hormuz should now be gradually released, according to Tamas Varga, analyst at brokerage PVM Oil.
“Whether the pre-March status quo will be re-established depends entirely on whether the truce can be turned into a permanent peace during the negotiations in Pakistan,” he added, reports RTE.
Shippers were still seeking clarity on the logistics, while refiners made inquiries about new crude loadings in response to the ceasefire agreement.
Several Gulf states reported missile launches and drone attacks, or issued warnings urging civilians to seek shelter, reports RTE.
“Even with a peace deal, Iran may be emboldened to threaten the Strait of Hormuz more frequently in the future, and the market will price in heightened risk to the Strait of Hormuz going forward,” said MST Marquee analyst Saul Kavonic.
The US-Israeli war with Iran produced the steepest monthly rise in oil prices ever recorded, surpassing 50%, reports RTE.
“There is still scope for a significant geopolitical premium being entrenched for the foreseeable future based on the details of the comprehensive agreement,” Commonwealth Bank analyst Vivek Dhar said in a note.
Trump revealed that the US had received a 10-point proposal from Iran, which he described as a workable foundation for negotiations, and stated that the two sides were well on their way to reaching a definitive long-term peace agreement, reports RTE.
“It’s a good start and could pave the way to a more permanent reopening – but lots of ‘ifs’ still to work out,” said IG analyst Tony Sycamore, reports RTE.
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