Oil prices experienced a decline on Friday, September 19, as the outlook for increased supply improved following the resumption of oil tanker movements through the Strait of Hormuz. This development comes in the wake of a peace agreement between the United States and Iran.
As of 0328 GMT, Brent crude futures decreased by 43 cents, or 0.54%, settling at $79.42 per barrel, while U.S. West Texas Intermediate crude dropped 17 cents, or 0.22%, to $76.43 per barrel. The front-month contract for July is set to expire on Monday.
The more actively traded August contract also saw a reduction, down 30 cents to $75.55 per barrel.
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On Thursday, both oil benchmarks reached their lowest levels since early March, as several tankers, including three registered under the Saudi flag, transported a total of 6 million barrels of crude through the strait shortly after the leaders of Iran and the U.S. signed an interim agreement aimed at ending their conflict.
Analysts anticipate that this agreement could lead to the release of over 85 million barrels of oil that have been stranded in the Gulf region into the global market. Additionally, the deal involves the lifting of U.S. sanctions on Iranian oil, which is expected to further enhance supply.
Tim Waterer, chief market analyst at KCM, remarked, “Traders are still awaiting concrete evidence that tanker operations through the Strait of Hormuz are returning to normal before making decisions about further market declines.”
Before the conflict, approximately 20% of the world’s oil and liquefied natural gas passed through the strait, and analysts believe trade could normalize in the coming months if the U.S.-Iran agreement proves stable. Middle Eastern producers are also preparing to resume their exports.
Kuwait Petroleum Corporation announced on Thursday that it had immediately lifted all force majeure notices that were previously in effect due to the conflict. Iraq’s Oil Minister Basim Mohammed stated that the country’s oilfields are ready to resume production, with output expected to gradually return to prior levels.
Nonetheless, Israel continues its military operations against Hezbollah in Lebanon, raising concerns about the longevity of the U.S.-Iran peace agreement.
Adding to market anxiety, U.S. Vice President JD Vance canceled a scheduled trip to meet with Iranian negotiators in Switzerland on Friday. Vandana Hari, founder of Vanda Insights, noted, “This is not the geopolitical environment that would instill confidence in the resumption of transit through Hormuz.”
Source: Financial Chronicle Biz English | Sri Lanka Business News.
