Oil Prices Fall to Pre-War Levels on Hopes of US-Iran Progress

Oil prices have fallen to levels not seen since before the start of the US-Israel war on Iran, as diplomatic efforts to end the conflict appeared to gain momentum and supply concerns eased.

Brent crude futures for August delivery stood at $70.82 per barrel as of 04:30 GMT on Thursday, down more than 1 percent and lower than at any point since February 27, according to Al Jazeera. The international benchmark has now fallen more than 38 percent from its post-war peak of over $126 a barrel reached on April 30.

The slide followed statements from Qatar, a key mediator between Washington and Tehran, which said that US and Iranian officials had made “positive progress” in indirect talks aimed at resolving issues related to their memorandum of understanding on ending the war. US President Donald Trump also expressed optimism on Wednesday, saying the “denuclearisation of Iran is moving along well.”

Vandana Hari, founder of the Singapore-based oil market analysis provider Vanda Insights, attributed the price decline to a steady uptick in oil flows out of the Gulf and “cautiously optimistic geopolitical sentiment.” She noted that several key issues in the memorandum remain unresolved, but the two sides appeared to have backed off confrontation on an interim Hormuz transit regime, at least for now.

“I expect crude to continue grinding lower until the backlog of stranded barrels has cleared, and prices could even swing into oversold territory,” Hari told Al Jazeera. “The real test of normalisation of Persian Gulf flows will come in the coming weeks.”

In separate reporting, prompt-month Brent futures for August delivery fell $1.06 (1.44 percent) to $72.68 a barrel by 06:39 GMT, while US West Texas Intermediate lost 76 cents (1.08 percent) to $69.58 a barrel, according to Al Jazeera. Both contracts hit their lowest since February 27, and August Brent was trading lower than September, signalling ample short-term supply.

US Energy Secretary Chris Wright told a forum that flows through the Strait of Hormuz were close to those before the start of the war, with at least 20 million barrels having exited the strait in the past 24 hours. He added that a return to complete normality would take a few weeks because the strait needs to be cleared of mines.

An initial accord last week to end the US-Israeli war with Iran, which began on February 28, allowed the resumption of traffic through the strait. The accord set up a 60-day period of negotiations to tackle tougher issues, such as Iran’s nuclear programme. Wright said oil would continue to flow through the strait even if the deal did not hold, and that Iran would not be able to close it again. Tehran has said it plans to impose maritime service fees on vessels crossing the strait, according to Al Jazeera.

Rising Middle East supply, together with Iran set to boost sales after a temporary reprieve from US sanctions, drove down prices of physical crude oil cargoes around the world.

Oman has opened temporary routes to ease tanker departures from the strait, according to Al Jazeera, as the region adjusts to the new transit arrangements.

Key Claims

  • Brent crude fell below $71 a barrel, reaching levels not seen since before the war began. (Al Jazeera)
  • Qatar reported “positive progress” in US-Iran talks, and US President Donald Trump said the “denuclearisation of Iran is moving along well.” (Al Jazeera)
  • US Energy Secretary Chris Wright said flows through the Strait of Hormuz are close to pre-war levels, with at least 20 million barrels exiting in the past 24 hours. (Al Jazeera)
  • Iran plans to impose maritime service fees on vessels crossing the Strait of Hormuz. (Al Jazeera)
  • Oman opened temporary routes to ease tanker departures from the strait. (Al Jazeera)
  • At least 40 vessels transited the Strait of Hormuz on Tuesday, according to reporting. (Al Jazeera)

This article compiles reporting from Al Jazeera. All statements and figures are attributed to that outlet's coverage.