Oil Hits Three Month Low on Hopes of US Iran Deal to Reopen Hormuz
By Aboki Forex —
Oil prices have fallen to a fresh three month low. Traders are betting that a US Iran deal will reopen the Strait of Hormuz and unleash a wave of crude supply.
Brent crude is now near $79 a barrel. It dropped as much as 1.1% earlier in the session. West Texas Intermediate is above $76.
The interim pact is due to be signed on Friday. It offers Tehran broad financial incentives including the right to sell its oil immediately.
Shipowners are already repositioning vessels. Two tankers that were headed toward Africa have turned around in the Indian Ocean. They are now switching destinations to the Middle East.
The market is loosening fast. Brent's prompt spread has narrowed sharply. The gap between the two nearest contracts is just 14 cents a barrel in backwardation. In early April that gap was $9.65 on fears of tight supply.
Crude prices have retreated sharply in recent weeks. Moves to end the war between Washington and Tehran are seen easing tightness in global energy markets.
Producers, shippers and traders are now watching closely. They want to know if the agreement will hold and how long it will take for vessel transits through the Hormuz chokepoint to fully resume.
Most traders still believe the US navy will play a key role in securing the waterway.