Oil prices dropped to their lowest point since early March on 18 June following the announcement of an interim agreement aimed at ending the US-Iran conflict and reopening the Strait of Hormuz.
The deal, which includes provisions to ease sanctions on Iran, prompted market expectations of increased oil supply.
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As of 08:11 GMT, Brent crude futures had fallen by $1.59, or 2%, to $77.96 a barrel (bbl). US West Texas Intermediate (WTI) crude had dropped by $1.83, or 2.38%, to $74.96/bbl, reported Reuters.
This was Brent’s lowest mark since 2 March, the first trading day after the initial US-Israeli strikes on Iran, while WTI was at its lowest level since 4 March.
Energy markets continued to react to the expectation of a quicker resumption of Iranian oil exports.
The 14-point memorandum sets out a 60-day period for negotiations, during which Iran has agreed to allow toll-free passage through the Strait of Hormuz.
Full traffic through the key shipping lane, used for oil and gas exports, is to be restored within 30 days under the agreement.
However, the deal defers several complex issues including Iran’s nuclear programme, and calls for the US and its partners to present a $300bn financial recovery plan for Iran.
According to industry analysts cited by the news agency, there may be a gradual recovery in oil movements through the strait. Some also stated that prices might not fall significantly as demand rebounds and inventories are replenished.
Goldman Sachs projects that Gulf oil exports could return to pre-war levels by the end of next month, with full recovery of crude production by October. The bank said exports are expected to increase by 13 million barrels per day (mbbl/d) as Hormuz flows recover.
International Monetary Fund chief Kristalina Georgieva suggested that oil prices are expected to ease gradually. Meanwhile, International Energy Agency head Fatih Birol highlighted the importance of completing negotiations within the designated 60-day period.
Amid the shifting supply landscape, Saudi Arabia’s Aramco is considering expanding its storage capacity worldwide.
Aramco chairman Yasir Al-Rumayyan said: “Aramco has storage facilities around the world, especially in Asia, in Korea and Japan, and we are thinking seriously of having larger storage facilities all over the world.”
