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Jeddah - Yasmine El Tohamy - SINGAPORE: Oil prices fell slightly on Wednesday as investors gauged the impact of a US-Iran peace deal, while uncertainty over full resumption of shipping through the Strait of Hormuz limited price declines.
Both benchmarks were down about 0.2 percent by 09:30 a.m. Saudi time, with Brent crude futures dipping 15 cents to $78.81 a barrel and US West Texas Intermediate falling 12 cents to $75.93 a barrel.
On Tuesday both had fallen about 5 percent for a second straight session to hit three-month lows, fuelled by hopes that a US-Iran deal would allow oil flows through the Strait.
“Markets are broadly stripping out the embedded geopolitical risk premium in oil prices,” said Priyanka Sachdeva, senior market analyst at Phillip Nova.
“That said, the path toward normalisation remains far from straightforward. While political agreements may be progressing, physical tanker traffic through the Strait has yet to fully recover.”
The deal would provide for the US to lift its blockade of Iran’s ports, while Tehran would allow oil tanker traffic through the Strait, effectively blocked since US and Israel strikes on Feb. 28.
“Oil markets retreated on expectations the Strait of Hormuz would reopen following the peace agreement, but traders held off further selling pending details,” said Hiroyuki Kikukawa, chief strategist of Nissan Securities Investment.
WTI is likely to stay volatile in a range of $10 above or below $80 a barrel, he added.
Before the closure, about a fifth of global crude oil and liquefied natural gas supplies flowed through the Strait.
Details of the interim peace deal began to emerge on Tuesday, with President Donald Trump saying it would rule out a nuclear weapon for Tehran and a US official saying it would allow Iran to sell oil upon signing.
The memorandum of understanding, not yet public, extends by another 60 days a tenuous ceasefire agreed in April, so as to allow room for talks toward a permanent truce.
Still, industry officials say a full return to pre-war production and refining levels is likely to take weeks, months or even years.
Israel has distanced itself from both the April ceasefire and the latest US-Iran pact, fuelling uncertainty about whether it will hold.
Israeli drone strikes targeted three vehicles in southern Lebanon on Tuesday, killing at least four and wounding others, Lebanon’s National News Agency said, prompting a rare public rebuke from Trump.
China’s crude oil throughput fell 9.1 percent in May on the year to its lowest in almost four years, data showed, also signalling that refiners were starting to draw on stockpiles amid the Iran war.
The American Petroleum Institute report showed US crude stocks fell 8.3 million barrels in the week ended June 12, the sources said.
It exceeded expectations for a draw of 4.6 million barrels, with official numbers due from the Energy Information Administration at 05:30 p.m. Saudi time on Wednesday.
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